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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2005
ISTANBUL STOCK EXCHANGE
ECONOMIC AND POLITICAL DEVELOPMENTS
Politic and Economic Environment:
There have been significant developments on
the Turkish economic and political agenda
over the past three years following the 2002
general elections which resulted in a singleparty
majority government. Turkey completed
an IMF-backed economic stabilization
program in February 2005, after meeting all of
the targets that were set in the 3-year IMF
stand-by arrangement.
The implementation of the stabilization
program has produced positive effects in
general on the economic balances and
specifically on inflation figures. With the help
of the program, Turkey has managed to
combine disinflation with economic growth.
Inflation decreased from more than 70% at the
beginning of 2002 to less than 10% within a
time span of about two years. Currently,
inflation is following a sustainable downward
trend which has allowed the economy to grow
strongly out of the slump that was created
with the financial crisis in 2001. From 2002 to
2004, GDP grew by 7.5% on average and the
trend of declining interest rates continued. The
yield on domestic bonds was lowered to 17%
on average from a rate of more than 30% in
2002. Further, the Turkish Lira continues to
appreciate. Due to this environment of
confidence, Turkey’s exports and imports
continue to rise; in fact, foreign trade volume
exceeded US$ 150 billion by the end of 2004.
The IMF Executive Board has approved a new
three-year stand-by agreement for the years
2005-2008 in May 2005, due to a sustained
positive economic environment and recent
developments on key legislation pertaining to
social security, banking sector and tax
administration
Turkey’s achievement in the implementation of
structural reforms and firmly maintaining
political stability in the last few years provided
momentum for progress in Turkey’s
prospective membership to the European
Union (EU). In its 17 December 2004 decision,
the European Council found that Turkey had
met the political criteria in terms of both
legislation and implementation and had
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recorded significant progress in
macroeconomic framework and thus decided
to open accession negotiations with Turkey on
3 October 2005.
Meanwhile, Turkey signed the Customs Union
Protocol which was the final condition to start
accession talks in July 2005.
Since the beginning of 2005 Turkey dropped
six zeros from its currency and has introduced
YTL (New Turkish Lira). With the changeover
to New Turkish Lira on January 1, 2005, both
TL and YTL will be in circulation for one year.
Banknotes and coins currently in circulation
will be withdrawn as of January 1, 2006.
In June 2005, Turkey has initiated the
privatization of 55% of Turk Telekom (TT)
subject to the approval by the government.
After the bargaining process, the highest bid
was announced as US$ 6.55 billion. The result
of the tender will be submitted to the
Competition Authority for permission while the
final decision will be given by the Council of
Ministers.
Economic Performance:
Following the GNP growth rate of 9.9%
achieved in 2004, the Turkish economy grew
by 5.3% in the first quarter of 2005. The
growth rate registered at the first quarter of
2004 was 13.9%.
By the end of May 2005, exports and imports
reached US$ 28.97 billion and US$ 45.1
billion, respectively, both registering an
increase of 22% compared to the same
period of 2004. Within the context of capital
movements, the capital and financial accounts
stood at US$ 8.2 billion and a net inflow of
US$ 4.1 billion of foreign portfolio investments
was observed at the end of May 2005.
Meanwhile, the increase in the producer price
index was realized at 1.9% and the consumer
price index was realized at 2.6% as of the
end-June 2005. The year-on-year consumer
price index and producer price index were
registered as 8.95% and 4.25% as of the end
of June 2005, respectively.
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 Incorporation of Turkey www.mkk.com.tr
The Turkish Derivatives Exchange (TurkDEX) www.turkdex.org.tr
ECONOMIC RATIOS
Domestic
savings
Turkey
Lower-middle-income group
Trade
Indebtedness
Investment
GROWTH OF INVESTMENT AND GDP
(%)
40
30
20
10
0
-10
-20
-30
-40
-50
97
GDI GDP
The consolidated budget registered a surplus
of YTL (New Turkish Lira) 1.7 billion in May
2005. Total revenue increased by 20% to YTL
51.1 billion, mainly due to the increase in tax
revenues, and expenditures increased by
1.6% to YTL 54.9 billion compared to the
same period in 2004. Thus, the consolidated
budget deficit contracted by 66.8% to an
amount of YTL 3.8 billion in the same period.
As of the end of June 2005, the ISE-National
100 Index, the main stock market index on the
Istanbul Stock Exchange (ISE) increased by
8% in YTL terms and by 9.5% in US$ terms
compared to the values at the end of 2004.
The main stock market indicator, the ISE
National-100 Index increased to a level of
26,957 in YTL terms at the end of June from
24,972 at the end of 2004. The stock market
total traded value on YTL basis increased by
18.7% to YTL 120.4 billion and in US$ terms
by 21.6% to US$ 90.3 billion at the end of
June 2005, when compared to the same
period of 2004. The average daily traded
value stood at YTL 956 million (US$ 717
million) at the end of June 2005.
The market capitalization of 298 ISE traded
companies increased to a level of YTL 141.3
billion (US$ 106.1 billion) at the end of June
2005. Currently, only one ETF (Exchange
Traded Fund) is traded on the ISE.
The net equity investment in Turkey by foreign
portfolio investors has been registered at
around US$ 19.5 billion as of end 2004
representing 61% of free float.
The turnover in public debt securities on YTL
basis, transacted on the Outright Purchases
and Sales Market, increased by 53.9% to YTL
268.4 billion and in US$ terms by 59.7% to
US$ 201.1 billion at the end of June 2005,
compared to the same period of 2004. The
Repo/Reverse Repo Market turnover on YTL
basis increased by 24.7% to YTL 892.1 billion
and in US$ terms by 29.4% to US$ 666 billion
in the same period. The average daily traded
value stood at YTL 9.2 billion (US$ 6.9 billion)
at the end of June 2005.
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* World Bank reports