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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2006 ISTANBUL STOCK EXCHANGE ECONOMIC AND POLITICAL DEVELOPMENTS Economic and Political Environment Following a comprehensive economic program with the strong backing of a single party majority government for about four years, Turkey has had significant achievements both on EU convergence and economic restructuring. Succesful implementation of the IMF-supported economic stabilization program produced impressive results on Turkey’s macroeconomic performance and strengthened the developments on key legislations pertaining to social security, banking sector and tax administration. Robust economic growth has been achieved with 8% on average during the last four years. Despite strong growth, inflation has come down to around 8% from around 70% in four years time. With strong fiscal policy net public debt to GNP ratio declined to 55.8% at the end of 2005 from 90.5% in 2001. Following a very busy privatization period in 2005, tenders of state owned enterprises including Turk Telecom, Tupras (Oil Refinery) and Erdemir (Iron and Steel Company) resulted with US$ 6.55 billion, US$ 4.14 billion and US$ 2.77 billion proceeds, respectively. The Privatization Administration held a number of successful tenders in the first half of 2006. The tender for the privatization of Erdemir, Turkey’s largest iron and steel producing entity was concluded on October 4, 2005 and the bidder proposed to pay USD 2.77 billion for 46.12% of Erdemir’s shares. Sale agreement was signed on February 27, 2006. Economic Performance GDP and GNP grew by 6.4% and 6.3%, respectively in the first quarter of 2006. In 2005, the Turkish economy grew by 7.6%. The strong growth is mainly attributable to the construction sector which grew by 25.9%. On the expenditures side, private sector consumption and investment expenditures made the highest contribution to growth by 7% and 8%, respectively. By the end of June 2006, exports and imports reached US$ 39.5 billion and US$ 65.2 billion, respectively, exports registering an increase of 11.5% and imports registering an increase of 18.3% compared to the January-June period of 2005. Accordingly, the rate of imports covered by exports stood at 60.5%. The year-on-year consumer price index increased to 10.12% as of end June 2006, from 8.95% as of end June 2005. The year-on-year producer price index increased to 12.52% as of end June 2006, from 4.25% as of end June 2005. The consolidated budget registered a surplus of YTL 2.1 billion in June 2006 bringing the year to date primary surplus to YTL 4.9 billion. Total revenue increased by 36.63% to YTL 84 billion and expenditures increased by 24.8% to YTL 81.6 billion in the first half of 2006 compared to the same period of 2005. Thus, the consolidated budget surplus is realized as YTL 2.4 billion, while the consolidated budget deficit was YTL 3.9 billion in the same period in 2005. As of the end of June 2006, the ISE-National 100 Index, the main stock market index on the ISE increased by 11.7% in US$ terms compared to June 2005. The main stock market indicator ISE National-100 Index increased to a level of 1,325.23 on US$ basis at the end of June 2006 from 1,177 at the end of June 2005. The stock market total traded value in the first half of 2006 increased to US$ 137.9 billion by 52.1% over the same period of 2005. The average daily traded value stood at US$ 1.112 million at end-June 2006. The market capitalization of 316 ISE traded companies increased to a level of US$ 128.3 billion at end-June 2006 compared to US$ 106.1 billion at end-June 2005. Three Exchange Traded Funds are traded on the ISE as of end June 2006. The net equity investment in Turkey by foreign portfolio investors has been registered at around US$ 26.4 billion as of end-June 2006 representing 65% of the free float of stock market. The turnover in public debt securities transacted on the Outright Purchases and Sales Market, decreased by 23% in US$ terms to US$ 154.8 billion in January-June period of 2006, compared to the same period of 2005. The Repo/Reverse Repo Market turnover increased by 141.3% to US$ 885.2 billion in the same period. The average daily traded value in the Outright Purchases and Sales Market and the Repo/Reverse Repo Market stood at US$ 8.3 billion as of end-June 2006. During the second quarter of 2006, ten companies “Vestel Beyaz Eflya San. ve Tic. A.fi.”. (a manufacturing company), “Selçuk Ecza Deposu Ticaret ve Sanayi A.fi.” (a wholesale trade company), “Asya Kat›l›m Bankas› A.fi.” (a bank), “Coca Cola ‹çecek A.fi.” (a beverage company), “Baflkent Menkul K›ymetler Yat›r›m Ortakl›¤›” (an investment trust), Metro Menkul K›ymetler Yat›r›m Ortakl›¤›” (an investment trust), “Taksim Yat›r›m Ortakl›¤› A.fi.” (an investment trust), “Euro Menkul K›ymetler Yat›r›m Ortakl›¤› A.fi.” (an investment trust) offered their stocks for the first time to public and started to be traded on the ISE National Market. “Silverline Endüstri ve Ticaret A.fi.” (a consumer trade company) and “Armada Bilgisayar Sistemleri Sanayi ve Ticaret A.fi.” (an information technology company) offered their stocks for the first time to public and started to be traded on the ISE Second National Market and the ISE New Economy Market, respectively. The amount of funds raised by the IPOs of ten companies was US$ 855.4 million.* * Istanbul Stock Exchange Key Information Contacts Capital Markets Board of Turkey www.cmb.gov.tr The Association of Capital Market Intermediary Institutions of Turkey www.tspakb.org.tr ISE Settlement and Custody Bank Inc.(Takasbank) www.takasbank.com.tr Central Registry Agency Inc. of Turkey www.mkk.com.tr The Turkish Derivatives Exchange (TurkDEX) www.turkdex.org.tr 2003-ORIGINS OF GROSS DOMESTIC PRODUCT (%) Services Industry (excl construction) Agriculture, forestry & fishing Construction 2003-COMPONENTS OF GROSS DOMESTIC PRODUCT (%) (a) Private consumption Government consumption Fixed investment Stockbuilding Exports of goods & services Imports of goods & services 57.9 26.8 11.8 3.5 70 60 50 40 30 20 10 0 -10 -20 -30 -40 66.6 13.6 15.5 7.3 27.4 -30.7 PAGE 82
FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2006 ISTANBUL STOCK EXCHANGE TURKEY ECONOMIC CHARTS AND TABLES 2001 2002 2003 2004 2005 GDP at market prices (YTL millions) 178,412 277,574 359,763 430,511 487,202 GDP (US$ millions) 145,573 184,400 241,300 300,600 361,500 Real GDP growth (%) -7.5 7.9 5.8 8.9 7.4 Consumer price inflation (av; %) 68.5 29.7 18.4 9.3 7.7 Population (millions) 69.3 70.3 71.3 72.3 73.3 Exports (US$ millions) 31,334 36,059 47,068 63,121 73,476 Imports (US$ millions) 41,399 51,554 68,808 97,540 116,773 Eports/imports ratio 75.7 69.9 68.1 64.8 62.9 Current-Account Balance (US$ millions) 3,390 -1,481 -6,808 -15,543 -23,227 Foreign exchange reserves (US$ millions) 18,879 27,069 33,991 36,006 50,518 Total external debt (US$ billions) 113.6 130.2 145 162.3 170,6 Debt-service ratio, paid (%) 40 46.5 38.5 33 32.4 Exchange rate (av) YTL:US$* 1.4386 1.6334 1.3949 1.3412 1.3848 Central Bank’s effective buying rates ECONOMIC FORECAST SUMMARY 2005 2006 2007 2008 2009 2010 Real GDP growth (%) 4.9 3.5 5.4 5.3 5.2 5.0 Consumer price inflation (%) 8.0 9.8 7.9 6.3 5.3 4.9 Budget balance (% of GDP) -3.7 -4.9 -4.4 -3.9 -3.2 -2.7 Current account balance (% of GDP) -5.9 -3.4 -3.5 -3.4 -3.4 -3.3 3-month interbank money market interest rate (av; %) 16.0 18.0 16.5 14.0 13.0 12.0 Exchange rate YTL:US$ (av) 1.35 1.50 1.61 1.71 1.81 1.90 Exchange rate US$:[euro] (av) 1.25 1.29 1.34 1.30 1.25 1.24 2003-PRINCIPAL EXPORTS (b) (US$ millions) Textiles & clothing 14,257 Metals 5,062 Motor vehicles & parts 5,245 Agricultural products 3,954 2003-PRINCIPAL IMPORTS (b) (US$ millions) Chemicals & products 5,549 Crude oil & gas 11,398 Machinery & equipment 15,790 Metals 6,792 Motor vehicles & parts 5,369 2003-MAIN DESTINATION OF EXPORTS (%) (b) 2003-MAIN ORIGINS OF IMPORTS (%) (b) EU 25 Germany UK USA EU Germany Russia Italy Italy France Russia France USA UK Other 13.9 8.8 7.7 7.3 12.9 9.3 7.1 6.4 4.8 5.8 4.4 2.9 8.4 54.6 46.7 Source: Economist Intelligence Unit ViewsWire PAGE 83
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