ANNUAL REPORT JUNE 2010
FEDERATION OF EURO-ASIAN STOCK EXCHANGES
ISTANBUL STOCK EXCHANGE
It is worth noting that the ISE ranked third
among the world markets in terms of
performance on local currency basis.
Huseyin Erkan
Chairman & CEO
Following a period of two years filled with
difficulties in the global economy, the worst
seems to be over and a global economic
recovery is under way. The exceptional steps
that were taken by policy makers in both
developed and emerging countries after the
collapse of Lehman Brothers in September
2008 have gone a long way toward taking the
financial markets under control and restoring
capital flows to developing countries. The
immediate outflow of international capital from
developing countries to safe havens in the
aftermath of the crisis has more or less
reversed itself. As a result, interbank liquidity in
dollar markets seems to revert to its pre-crisis
range, a large number of emerging-market
exchange rates have recovered their pre-crisis
levels against the U.S. dollar, equity markets
have recovered much of their initial losses,
and capital flows to developing countries have
resumed. Borrowing costs for emerging
market borrowers, although still high, have
stabilized over the last few quarters. The real
sector recovery is also under way. Global
industrial production, although 5 percent
below its level compared to a year earlier in
October 2009, improved in the third quarter of
2009. On the other hand, in addition to being
fragile, the recovery is expected to decelerate
HISTORY AND DEVELOPMENT
In 1981, the Capital Market Law was enacted
and one year later, the Capital Markets Board
was established. In October 1983, the
Parliament approved the Regulations for the
Establishment and Operations of Securities
Exchanges, which paved the way for the
establishment of the ISE, formally inaugurated
in 1985.
The ISE provides a fair and transparent
environment for trading of a wide variety of
securities namely, stocks, exchange traded
funds, warrants, government bonds, Treasury
bills, corporate bonds, money market
instruments (repo/reverse repo), foreign
securities etc. Currently, there are four markets
operating at the ISE; the Stock Market, the Bonds
and Bills Market and the Foreign Securities
Market and Emerging Companies Market.
In 1989, the foreign exchange regime was
amended to allow non-residents to invest in
Turkish securities, making the Turkish securities
markets open to foreign investors without any
restrictions on the repatriation of capital and
profits.
The ISE was recognized as a “Designated
Offshore Securities Market” by the U.S.
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in the second half of 2010 as the effect of
fiscal and monetary measures fade. While
recovery dominates all sectors, the negative
impact of the Dubai World event and the credit
rating downgrades of Greece and Mexico at
the end of 2009 should not be overlooked.
Especially the developments in the Euro zone
should be followed closely.
In this atmosphere, the Istanbul Stock
Exchange has got its share from the recovery.
The ISE 100 Index, the main indicator of the
ISE, increased by 101 percent in US$ terms in
2009, compared to the value at end-2008. It is
worth noting that the ISE ranked third among
the world markets in terms of performance on
local currency basis. The Stock Market total
traded value maintained its vivacity, with a total
trading volume amounting to US$ 316 billion
for the year as a whole. The average daily
traded value stood at US$ 1.3 billion during
the same period. As of end-2009, the market
capitalisation of 315 companies traded on the
Istanbul Stock Exchange, increased by 97
percent compared to end-2008, reaching
US$ 236 billion. The share of foreign portfolio
investors in the free-floating shares of the ISE
stood at 67 percent as of end-2009, up from
66 per cent as of end-2008.
Securities and Exchange Commission in 1993
and was designated as an “appropriate foreign
investment market for private and institutional
Japanese investors” by the Japan Securities
Dealers Association in 1995. Likewise, the ISE
has been approved by the Austrian Ministry of
Finance as a regulated market in accordance
with the regulations of the Austrian Investment
Fund Act in 2000. As a result of all these
developments, foreign investors now account
for a substantial volume of daily trading and
hold around 67 percent of the publicly-held
stocks in their portfolios amounting to US$ 55.6
billion, as of end-2009.
The ISE currently owns 32.62% of the ISE
Settlement and Custody Bank, 30% of the
Central Registry Agency and 18% of the Turkish
Derivatives Exchange. On the international
level, the ISE has participations in the Kyrgyz
Stock Exchange and Baku Stock Exchange
with stakes of 24.51% and 5.26%, respectively.
FUTURE OUTLOOK
• The ISE plans to establish the “Emerging
Companies Market” with an aim to offer a
different application procedure to small and
medium sized companies (SMEs) for trading
on the Istanbul Stock Exchange. The idea
behind the facilitation of the application
The average daily trading volume on the ISE
Bonds and Bills Market, on the other hand,
showed a slight decrease of 12 percent during
2009. During the year, the total trading volume
of the Outright Purchases and Sales Market
increased by 13 percent to US$ 270 billion,
while the total trading volume of the
Repo/Reverse Repo Market decreased by
15 percent to almost US$ 2 trillion as of
end-2009.
Included in the ISE’s plans for 2010, is the
establishment of the “Emerging Companies
Market” with a view to offering new trading
opportunities for small and medium sized
companies (SMEs). The main purpose that lies
behind this initiative is to allow SMEs to have
convenient access to the capital markets for
their financing needs. Another important
initiative that we are taking this year is the
organization of the “Initial Public Offering (IPO)
Turkey Summit” in Istanbul in May. The Summit
will bring together some 1,350 sizeable Turkish
companies that are not yet traded on the
ISE, as well as the leading companies in
the financial circles and we expect this
organization to be instrumental in bringing
new companies to the ISE.
procedures is to give these companies the
opportunity to raise funds through public
offerings, as a long term and low cost
financing alternative. Furthermore, in order to
contribute to price formation and liquidity,
trading on the Emerging Companies Market,
different from the continuous auction system
on the Stock Market, will be through a
combination of single price method and
continuous auction with market maker system.
The companies traded on the Market,
demonstrating progressive performance in
time, will have the opportunity to be transferred
to any of the submarkets of the ISE Stock
Market.
• As part of its efforts towards increasing the
number of public offerings, the ISE will
organize “Initial Public Offering (IPO) Turkey
Summit” in Istanbul on May 6-7, 2010. The
Summit aims to bring together around 1,350
leading Turkish companies that are yet not
traded on the Istanbul Stock Exchange and
financial intermediaries, audit firms, law firms,
consultancy firms, sectorial associations as
well as domestic and international private
equity funds, investment banks and other
institutional investors, which are considered to
be important constituents of public offerings.