FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2007ISTANBUL STOCK EXCHANGEOsman BirsenChairman & CEOIn 2006, there were 13 new listings on theISE Stock Market. The market capitalisationof 316 ISE traded companies reachedUS$ 163.8 billion at the end of 2006.The Turkish economy has grown by a third sincethe 2001 crisis. Extensive macro-economic andstructural reforms have helped to increaseconfidence, reduce risk premia, and stimulatedomestic and foreign investment. However, Turkeywas seriously affected by the decline in the riskappetite of the international financial markets inearly 2006, which led to a currency turmoil andrising interest rates as foreign investorstemporarily withdrew from emerging markets.This stemmed mainly from the concerns that USinterest rates would rise more than previouslyexpected. For the Turkish economy, the mainchallenges that remain to be addressed are,1) to further strengthen the fiscal and monetaryinstitutions in order to make the economy moreresilient to shocks, 2) to accelerate the pace ofreform in labor, product and agricultural marketsand in the social security and education systems.The impressive package of fiscal consolidationand institutional reform that has been appliedsince the 2001 crisis has created a strongfoundation for economic growth. As a result of thisprogram, GDP growth rate has been strong andstable, inflation has fallen, and the public debtburden has been reduced significantly. On theother hand, the current account deficit remainslarger than expected.In 2006, the decisive implementation of acomprehensive economic program has helpedTurkey significantly improve its macroeconomicsituation. The ongoing process of EU accessionand the signing of a new Stand-By arrangementwith the IMF for the period of 2005-2008 havecreated two strong anchors for increasing Turkey’sgrowth potential and improving a betterfunctioning market economy.As far as the Istanbul Stock Exchange (ISE) isconcerned, some of the ISE member brokeragehouses, banks and some ISE traded companieswere bought by foreign investors through takeovers,mergers and acquisitions. Consequently,the share of foreign banks in the Turkish bankingsector increased.As of the end of 2006, the ISE-National 100 Index,the main stock market index on the ISE,decreased by 6.1% in US$ terms compared to thevalues at the end of 2005. The stock market totaltraded value increased to US$ 229.6 billion by13.8% as of the end of 2006, compared to the endof 2005. The average daily traded value stood atUS$ 919 million at the end of 2006.In 2006, there were 13 new listings on the ISEStock Market. The market capitalisation of 316ISE traded companies registered a slight increaseto reach a level of US$ 163.8 billion at the end of2006 compared to the previous year. Six ETFs(Exchange Traded Fund) are traded on the ISE asof the end of 2006.The net equity investment in Turkey by foreignportfolio investors in 2006 was registered atUS$ 1,143 billion; representing 65% of the freefloatingshares as of end-2006.The ISE Bonds and Bills Market, on the otherhand, was also quite hectic; the average dailytrading volume increased by 18% in 2006 toreach US$ 8,130 million.The ISE starts the year 2007 with new projectsincluding the launch of an “opening session” forthe Stock Market. The opening session will consistof three phases, namely; Opening (08:30-09:50),Order Entry (09:30-09:50) and Opening Process(09:50-10:00). The Disclosure Automation Project,which will enable traded companies to directlydisclose information using Internet technologiesand digital certificates, is planned to be put intouse in 2007.HISTORY AND DEVELOPMENTIn 1981, the Capital Market Law was enacted andone year later, the Capital Markets Board wasestablished. In October 1983, the Parliamentapproved the Regulations for the Establishmentand Operations of Securities Exchanges, whichpaved the way for the establishment of the IstanbulStock Exchange (ISE), formally inaugurated on 26December 1985.Currently, there are three markets operating at theISE; the stock market, the bonds and bills marketand the foreign securities market. The ISE providesa fair and transparent environment for trading of awide variety of securities namely, stocks, exchangetraded funds, government bonds, Treasury bills,money market instruments (repo/reverse repo),corporate bonds and foreign securities.As of the end of June 2007, 103 out of 104members have been provided with remote accessto the stock market trading systems. During thesame period, the number of orders sent bymembers via Ex-API (Express ApplicationProgramming Interface) terminals reached 99% ofall orders, with the number growing steadily.Trading on the bonds and bills market is alreadycarried out remotely.In 1989, the foreign exchange regime wasamended to allow non-residents to invest in Turkishsecurities, making the Turkish stock and bondmarkets open to foreign investors without anyrestrictions on the repatriation of capital and profits.The ISE was recognized as a “Designated OffshoreSecurities Market” by the U.S. Securities andExchange Commission in 1993 and wasdesignated as an “appropriate foreign investmentmarket for private and institutional Japaneseinvestors” by the Japan Securities DealersAssociation in 1995. Likewise, the ISE has beenapproved by the Austrian Ministry of Finance as aregulated market in accordance with theregulations of the Austrian Investment Fund Act in2000.As a result of all these developments, foreigninvestors now account for a substantial volume ofdaily trading and hold around 70.5% of the publiclyheldstocks in their portfolios.The ISE currently owns 32.6% of the ISE Settlementand Custody Bank (Takasbank), 30% of the CentralRegistry Agency and 18% of the Turkish DerivativesExchange (TURKDEX). On the international level,the ISE has participations in the Kyrgyz and BakuStock Exchanges with stakes of 24.5% and 5.55%,respectively.FUTURE OUTLOOK• The International Bonds Market within the ISEForeign Securities Market provides a transparentand secure trading environment for listed TurkishSovereign Eurobonds and has been active since 16April 2007. The Market is open from Monday toFriday and transactions take place between 09:30-12:00 and 13:00-17:00 on business days.• The ISE will make some changes in the StockMarket trading hours. The new trading hours willcome into effect as of 7 September 2007.According to the new arrangement the openingsession of the first session will be reduced 15minutes and continuous trading will be extended 15minutes, as to continuous trading will take placebetween 09:45-12:00. As of 7 September 2007, thesecond session will be extended half an hour andwill take place between 14:00-17:00.• The ISE has launched “the opening session” forthe Stock Market starting from 7 February 2007.• The joint and central surveillance project of theCapital Markets Board and the ISE, which allowsreal time surveillance to be carried out electronicallyand more efficiently, is in progress.• The Disclosure Automation Project, which willenable traded companies to directly discloseinformation using Internet technologies and digitalcertificates, is being tested. With the new system,financial statements, explanatory notes, specialsituations and other information submitted by thecompanies will be received electronically in line withthe information security standards and bedisclosed to the public by electronic means.• The ISE is coordinating the reinforcement ofcooperation among the Organization of IslamicConference (OIC) Member States’ stock exchangesforum. Technical Committee and InformationTechnology (IT) Committee work on the possibleareas of cooperation.PAGE 80
FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2007ISTANBUL STOCK EXCHANGEOFFICIAL 6 MONTH STATISTICSUS$ millions# Shares millionsTotal Volume Average Daily Volume Total Volume Average Daily VolumeStocksJan-07 19,627.62 981.38 8,173.14 408.66Feb-07 22,172.03 1,108.60 9,850.52 492.53Mar-07 20,627.54 937.62 9,801.99 445.55Apr-07 23,211.96 1,160.60 10,843.77 542.19May-07 23,644.59 1,028.03 9,208.05 400.35Jun-07 16,753.44 797.78 6,562.89 312.52TOTAL 126,037.18 1,002.33 54,440.35 433.63BondsJan-07 28,101.68 1,405.08 0.0582 0.0029Feb-07 22,740.30 1,137.01 0.0498 0.0025Mar-07 26,209.03 1,191.32 0.0566 0.0026Apr-07 20,426.82 1,021.34 0.0411 0.0021May-07 24,886.06 1,082.00 0.0477 0.0021Jun-07 24,751.62 1,178.65 0.0452 0.0022TOTAL 147,115.50 1,169.24 0.2986 0.0024OtherJan-07 134,780.09 6,739.00 0.050 0.0025Feb-07 130,099.19 6,504.96 0.049 0.0024Mar-07 157,831.53 7,174.16 0.059 0.0027Apr-07 142,596.81 7,129.84 0.052 0.0026May-07 172,204.24 7,487.14 0.059 0.0026Jun-07 159,234.65 7,582.60 0.055 0.0026TOTAL 896,746.52 7,102.95 0.32 0.0026MarketCapitalization(US$ millions)IndexMONTHLY STOCK VOLUME VS INDEX(US$ millions)StocksIndexMONTHLY MARKET CAPITALIZATION(US$ millions)Jan-07 172,118.82 1,696.60Feb-07 175,002.21 1,707.44Mar-07 186,493.39 1,842.28Apr-07 193,309.62 1,925.20May-07 218,184.73 2,082.33Jun-07 221,689.46 2,102.0425,00020,00015,00010,0002,5002,0001,5001,000250,000200,000150,000100,0005,00050050,000000Jan Feb Mar Apr May Jun Jan Feb Mar Apr May JunCONTACT INFORMATIONContact Name Mr. Eren Kiliclioglu E-mail dis@imkb.gov.tr Website www.ise.orgPAGE 81
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