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OVERVIEW OF TURKISH ECONOMY & CAPITAL
MARKETS,
POLICIES AND NOVELTIES DURING THE EU
ADJUSTMENT PROCESS,
TURKEY – GERMANY INTERACTIONS IN TERMS
OF CAPITAL MARKET COMPLIANCE
Meltem ULUSAN, PhD
ISTANBUL KÜLTÜR UNIVERSITY
TURKISH ECONOMIC
OUTLOOK
TURKISH ECONOMY
CPI:
May 2009: 5.24%
The Course of CPI and GDP Growth
80
60
%
40
20
CPI
GDP Growth
CPI Target
GDP Growth Target
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
-20
1999
0
TURKISH
ECONOMY
Unemployment:
Population:
I. Quarter 2009
16.1%
Dec. 2008
71,517,100
60.0
12,000
50.0
10,000
40.0
8,000
30.0
6,000
20.0
4,000
10.0
2,000
0.0
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Labour Force Part.
Unemployment Rate
GDP per Capita
US$
%
Employment Data & GDP per Capita
TURKISH ECONOMY
90
85
80
75
70
65
60
55
50
45
40
35
30
25
20
15
10
5
0
2000
2001
2002
2003
2004
2005
2006
2007
2008/01
2008/02
2008/03
2008/04
2008/05
2008/06
2008/07
2008/08
2008/09
2008/10
2008/11
2008/12
2009/01
2009/02
2009/03
2009/04
%
Manufacturing Industry Capacity Utilization Rates
Manufacturing Industry Capacity Utilization Rates
TURKISH ECONOMY
Export:
04 / 2009:
-27.9%
Import:
04 / 2009:
-42%
The Course of Export and Import
225,000
80
200,000
70
175,000
60
50
125,000
%
US$ m
150,000
40
100,000
30
75,000
20
50,000
10
25,000
0
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Export
Import
Export/Import
TURKISH ECONOMY
Country - Based Breakdown of Turkish Exports
(May 2009)
Germany
France
Others
UK
Italy
Iraq
China
Bulgaria
Egypt
Belgium
Saudi Arabia
Holland
Algeria
Greece
Libya
Iran
Spain
Romania
USA
Russian Federation
United Arab
Emirates
TURKISH ECONOMY
10,000
US$ m
-20,000
-30,000
-40,000
-50,000
Current Account
Current Account / GDP
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
-10,000
1998
0
3.0
2.0
1.0
0.0
-1.0
-2.0
-3.0
-4.0
-5.0
-6.0
-7.0
%
Balance of Payments - The Course of Current
Account and Its Share in GDP
TURKISH ECONOMY
Balance of Payments - The Course of Financial
Account (US$ m)
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
-10,000
-5,000
0
5,000
Direct Investment
10,000
15,000
Portfolio Investment
20,000
25,000
Other Investment
30,000
TURKISH ECONOMY
Breakdown of Gross External Debt & GED / GDP
200,000
60.0
180,000
50.0
160,000
40.0
120,000
100,000
30.0
80,000
20.0
60,000
40,000
10.0
20,000
0
0.0
2002
2003
2004
2005
2006
2007
2008
%
US$ m
140,000
TURKISH ECONOMY
The Course of Foreign Exchange Rates
2.5
2
1.5
1
0.5
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
US$/TRL
€/TRL
TURKISH CAPITAL
MARKETS
POLICIES & NOVELTIES
DURING THE EU
ADJUSTMENT PROCESS
A HISTORICAL PERSPECTIVE TO SECURITY
MARKETS FROM THE OTTOMAN EMPIRE TO
TURKISH REPUBLIC
• Borrowing of the Ottoman Empire
• Capitulations and Bond Issues
• Galata Bankers and Foreigners’ Dominance on the
Market
• “Dersaadet Securities Exchange”
• “Istanbul Securities and Foreign Exchange
Bourse”
• Banker’s Event
• 1981 Turkish Capital Market Law
• The establishment of the ISE (1986) and
TurkDEX (2005)
PILLARS OF TURKISH CAPITAL
MARKETS
• Stock Exchanges
• Istanbul Stock Exchange (ISE)
• Turkish Derivatives Exchange (TurkDEX)
• Legal Framework
• Companies
• Banks & Brokerage Houses as
Intermediaries
• Investors
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D u d alia
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Te ul
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Te ran
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W viv
W a rs S E
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a
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B
US$ bn
TURKISH CAPITAL MARKETS
MCaps and Trading Com panies in Stock Exchanges - 2008
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
1,110,580
118,329
Mcaps ($ bn)
Trading Companies
4000
3500
3000
2500
2000
1500
1000
500
0
TURKISH CAPITAL MARKETS –
ISTANBUL STOCK EXCHANGE (ISE)
• Established in 1986
• Markets
• Stock Market
• 1986: 80 companies, 938 mn $ Mcap, 13 mn $ trading volume
• 2009/06: 316 companies, 156 bn Mcap, 106 bn $ trading
volume
• Bonds & Bills Market
• 1986: 312 mn $ trading volume
• 2009/06: 937 bn $ trading volume
• ISE Foreign Securities Market – Since April 2007
• International Bond Market (Turkish Sovereign Bonds)
TURKISH CAPITAL MARKETS Market Value:
ISE
June ‘09
-45% compared to 2007
350,000
300
300,000
250
250,000
200
200,000
400%
2500
300%
2000
1500
150
150,000
1000
100
100,000
500
50
50,000
0
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
0
Number of Trading Companies
Mcap ($ bn)
200%
100%
0%
0
-100%
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
350
3000
ISE - National 100 Index (A nnual Closures in US$)
Annual Returns (%)
TURKISH CAPITAL MARKETS –
TURKISH DERIVATIVES EXCHANGE
(TURKDEX)
Option contracts are underway!!!
• Established in 2005
• Products
•
•
•
•
Equity Index Futures Contracts
Currency Futures Contracts
Interest Rate Futures Contracts
Commodity Futures Contracts
• Annual Trading Volume:
•
•
•
•
2005: $ 2,165 m
2006: $ 12,309 m
2007: $ 101,816 m
2008: $ 136,655 m
TURKISH CAPITAL MARKETS –
TURKISH DERIVATIVES EXCHANGE
(TURKDEX)
Breakdown of Transaction Volume in
TurkDEX (2005)
Equity Index
Interest
Currency
Commodity
Breakdown of Transaction Volume in
TurkDEX (2007)
Equit y Index
Int erest
Commodity
Gold
Breakdown of Transaction Volume in
TurkDEX (2006)
Equity Index
Interest
G-Bonds
Currency
Breakdown of Transaction Volume in
TurkDEX (2008)
Currency
Equity Index
Interest
Currency
Commodity
TURKISH CAPITAL MARKETS –
LEGAL FRAMEWORK
• Turkish Capital Market Law
• regulate and control the secure, transparent and stable
functioning of the capital market and to protect the
rights and benefits of the investors
• Decree – by – Law
• second legislation for capital markets
• ISE Regulations
• regulating stock exchange quotation, work regulations,
Courtage and discipline rules
• Communiqués, circulars and decrees of Council of
Ministers
POLICIES&NOVELTIES REGARDING
LEGAL FRAMEWORK DURING THE
EU ADJUSTMENT PROCESS
• Public disclosure policy of Turkish CML
• Registration of capital market instruments
• ISE Quotation Regulation foresees
alterations;
•
•
•
•
•
capital base calculation
minimum equity requirement
free float rate
mandatory intermediation facilities
prospectus publication
• Amendments regarding UCITS Directives
major
TURKISH CAPITAL MARKETS –
TRADING COMPANIES, POLICIES &
NOVELTIES
• Manufacturing firms and banks are dominant in
the ISE trading volume
• A major step achieved, in terms of the EU
compliance;
• International Financial Statement Reporting (IFSR)
• Quite a long way to go through;
•
•
•
•
•
tax subsidies (corporate tax deductions)
corporate governance principles
merger & acquisition legislation
independent auditing standards
rating facilities
TURKISH CAPITAL MARKETS INTERMEDIARIES, POLICIES &
NOVELTIES
Number of
Intermediaries
2006
2007
2008
ISE Stock Market
100
99
97
ISE Bonds & Bills Market
126
132
125
Banks
41
40
40
Brokerage Houses
85
92
85
55
73
78
Banks
14
14
15
Brokerage Houses
41
59
63
TURKDEX
• The course of Turkish banks’ intermediary activities is required to be
negotiated and arranged, in line with the EU legislation
• Minimum capital requirements, security borrowing facilities, foreign
brokerage houses’ allowance in terms of operating without Turkish
partners could be the other major issues in the EU adjustment process,
on behalf of intermediaries
TURKISH CAPITAL MARKETS –
INVESTORS
100%
80
90%
70
80%
60
70%
60%
50
50%
40
40%
30
30%
20
20%
10
10%
0%
0
1999
2000
Domestic Investors
2001
2002
Foreign Investors
2003
2004
2005
Foreign Custody Ratios
2006
2007
2008
Domestic Custody Ratios
% C u sto d y R atio s
Sto ck T rad in g Vo lu m e R atio s
Breakdown of Stock Trading Volume and Custody Ratios among Investors on
ISE Stock Market
POLICIES & NOVELTIES
REGARDING INVESTORS DURING
THE EU ADJUSTMENT PROCESS
• Success Stories;
• establishment of Investor’s Protection Fund in 2001
• Capital Markets Board’s projects namely guarantee funds and
fund baskets
• On our way to the EU compliance;
• fund governance principles
• private pension fund arrangements (taxation and the
contribution of employer)
• establishment of housing finance system supported by risk
management measures
• providing competition advantages for institutional investors,
• enlargement of the coverage of “insider” term
• setting up specialized courts, could be the major issues on
behalf of investors
TURKEY – GERMANY
INTERACTIONS IN
TERMS OF CAPITAL
MARKET COMPLIANCE
TURKEY & GERMANY
INTERACTIONS IN TERMS OF
CAPITAL MARKET COMPLIANCE
• Through a project launched in 2006, Germany and
Turkey were chosen as “twinning partners”, in terms of
Germany’s assisting Turkey’s Capital Markets Board to
comply fully with the EU Capital Market standards.
• Amount:€ 1.9 m Duration: 24 months (Jan. 2006 – Dec. 2007)
• Main components of the project:
• Adaptation of Capital Markets Legislation in Conformity
with the EU Acquis
• Strengthening the Administrative Capacity of Capital
Markets Board
• Design of a Regulatory Impact Assessment System
• Training
• Public Awareness
TURKEY & GERMANY
INTERACTIONS IN TERMS OF
CAPITAL MARKET COMPLIANCE
• Results of legislation adaptation;
• the proposals of 15 new sections and several amendments of Capital
Market Law, 4 new regulations and 15 new communiqués related with
topics such as,
• market abuse, public disclosure, manipulation, buy-back transactions,
intermediary activities, prospectus, investor compensation, investment
funds, auditing, clearing & settlement, capital adequacy, corporate law, take
– over and transparency
• Results of strenghtening the CMB’s administrative capacity;
• operational manuals were prepared and existing procedures were
reviewed
• Results of designing regulatory impact assessment system;
• required guidelines were approved
• Results of training;
• training sessions were held for capital market stuff
• Results of public awareness;
• kick off, conferences and closing events were organized
LESSONS TO BE LEARNED FROM
GERMAN EXPERIENCE
• Germany: unification of German financial market (banking,
capital markets and insurance) under the roof of sole regulatory
institution (Bundesanstalt für Finanzdienstleistungsaufsicht –
BaFin)
Turkey: three separate institutions namely, Banking Regulatory
and Supervisory Board, Capital Markets Board and Insurance
Supervisory Board
• Germany: vertical integration structure of German Stock
Exchange (Deutsche Börse)
Turkey: different facilities are being carried out by different
institutions
• Germany: a publicly offered exchange: German Stock Exchange
Turkey: ISE’s public offering ????
FINAL REMARKS
• It’s a long but a decisive journey to the EU
• “Capital market compliance” is one of the stops
• The road map of capital market alignment has
been composed and the process runs all along the
line
• Turkey has a loyal and a confident accompany,
namely Germany, for assistance and guidance,
during this journey
• Following the full compliance, Turkish capital
markets would be able to experience a fair
competition on global basis