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OPPORTUNITIES IN TURKISH CAPITAL MARKETS

OPPORTUNITIES IN TURKISH CAPITAL MARKETS. Hüseyin ERKAN Chairman & CEO Istanbul Stock Exchange (ISE). The 3 rd Turkish-Arab Economic Forum June 12-13, 2008, Istanbul. Turkey: Gateway to Europe, Asia and the Middle East. Turkish economy has a growing potential in different sectors

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OPPORTUNITIES IN TURKISH CAPITAL MARKETS

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  1. OPPORTUNITIES IN TURKISH CAPITAL MARKETS Hüseyin ERKAN Chairman & CEO Istanbul Stock Exchange (ISE) The 3rd Turkish-Arab Economic Forum June 12-13, 2008, Istanbul

  2. Turkey: Gateway to Europe, Asia and the Middle East • Turkish economy has a growing potential in different sectors • Property projects • Telecommunication & Technology • Infrastructure Projects (utilities, ports, highways) • Turkey stands to be a corridor in the middle of the GCC countries, Europe and Asia • Net FDI to Turkey in 2006-2007 is US$ 20 billion in each year (1/3 of the net FDI comes through the ISE) • The Turkish capital markets are highly liquid and appeal to foreign investors (high level of investor confidence) • Enhanced market infrastructure • Legal framework in harmony with the international standards • Technological infrastructure is strong and competitive

  3. Improving Macroeconomic Indicators • A stable political and economic outlook • Appropriate business environment for both FDI and portfolio investments • Successful privatization programs • Harmonization with the EU countries • Efficient banking and capital market system

  4. Investment Opportunities in Turkey

  5. ISE’s Experience • Coordinator of the “OIC Member States Stock Exchanges Forum’’ • President of the “Federation of Euro-Asian Stock Exchanges” (FEAS)

  6. ISE’s ExperienceRelations with the OIC Member Countries 57 Member States31 Stock Exchanges 8 Observers

  7. OIC Member States Stock Exchanges Forum • OIC Member States Stock Exchanges Forum (the first meeting was held on March 2005 in Istanbul) • Aim: To promote cooperation among the stock exchanges of the OIC Member States. • Out of 57 OIC Member States, only 38 of them have functioning stock exchanges. 16 out of 38 countries are the members of FEAS. • Working Committees (Technical & IT Committee)

  8. OIC Member States Stock Exchanges Forum(Proposals) • The definition and certification of the securities • Creation of regional market indices • Cooperation among regulatory bodies and other capital market institutions (i.e. clearing, custody institutions) • Cooperation with the existing federations • Organizing joint training and staff exchange programs

  9. Working Committees • Technical Committee (consists of 11 members) • Creating Common Indices • Promoting the creation of Islamic Depository Receipts (IDR) • Cross-listing and Cross-membership Opportunities • Exchanging Staff and Organizing Training Programs • Defining Areas of Cooperation (i.e. Common trading platform) • Questionnaire – Surveys for the assessment of the stock exchanges • IT Committee (consists of 8 members) • Assessment of technological levels of the participating stock exchanges • Establishment of a Data Center

  10. ALBANIA AZERBAIJAN (2) ARMENIA BAHRAIN BELARUS BOSNIAHERZEGOVINA (2) FEAS - FEDERATION OF EURO-ASIAN STOCK EXCHANGES 29 Countries32 Member Exchanges 8 Affiliate Members • TURKMENISTAN • TURKEY • UKRAINE • UNITED ARAB EMIRATES • UZBEKISTAN • BULGARIA • CROATIA • EGYPT • GEORGIA • IRAN • IRAQ MEMBER EXCHANGES • OMAN • PAKISTAN (2) • PALESTINE • ROMANIA • SERBIA • MONTENEGRO • JORDAN • KAZAKHSTAN • KYRGYZ REPUBLIC • MACEDONIA • MOLDOVA • MONGOLIA

  11. How FEAS Serves to the Needs of Member Stock Exchanges ? • Promotes mechanisms for reliable, transparent and continuous trading and settlement • Creates greater awareness and visibility for the regions stocks and investment opportunities • Helpsto promote the listing ofhome market investment grade companies in the regional market and encourages them to get involved in regional indexes (i.e. Dow Jones) • Provides network and updated information to the new members at the region, with meetings, web applications & publications (with the joint work of FEAS, ISE and OECD) • “Best Practices for the Development of Stock Exchanges in Transition Economises” • “SME Financing: Alternative Sources of Finance”

  12. How FEAS Serves to the Needs of Member Stock Exchanges ? • Helps create linkages among: • The regions’ intermediaries • The regions’ data providers • The regions’ settlement and custody institutions • Creates a centeralized training hub for FEAS members in order to encourage research and regulatory implementation via bilateral exchange program • Promote Corporate Governance

  13. FEAS Region Statistics

  14. Financial centers Potential candidates Istanbul: A City with an International Financial Center Potential

  15. ISE’s Market Performance

  16. Istanbul attracts and appeal to Major International Financial Institutions

  17. Market Capitalization (Billion USD) Source: WFE, S&P

  18. Market Traded Value (Billion USD) Source: WFE, S&P

  19. Number of Listed Companies Source: WFE, S&P

  20. Arab Countries’ Stock Market Capitalization(2005-2007, Billion USD) Source: Standard & Poors

  21. Market Capitalization (Million USD)Arabic Countries Average vs. Turkey 76,4% Source: S & P

  22. Market Traded Value (Million USD)Arabic Countries Average vs. Turkey 33% Source: S & P

  23. Comparison of Bonds & Bills Markets Traded Value (2007, billion USD) Source: WFE

  24. Index Returns(2007/12, USD based) Source: WFE

  25. ISE National 100 Index(USD based) 7,6 times increase Source: ISE

  26. Comparison of ISE-100 with MSCI Indices (2005/6=100 USD based) Source: Bloomberg, Morgan Stanley

  27. P/E Ratios Source: Bloomberg

  28. Foreign Participation in the IPOs Source: ISE Foreign participation in IPOs is about 66% on average in the last 3 years

  29. Foreign Participation in the ISE Stock Market(as of % of free float market capitalization) Source: CRA

  30. Regional Cooperation • New joint financial instuments may be developed • Creation of regional indices, ETFs • The regional countries may further cooperate to enhance common standards in their capital markets • The 2nd OIC Member States Stock Exchanges Forum that will be held in Istanbul by the ISE on 18-19 October, 2008 may offer a valuable opportunity

  31. Future Prospect • Favorable oil market conditions are likely to persist in near term • Arabic countries’ capital markets have stabilized and will begin attracting new foreign investment • Turkish capital markets provide attractive prospects for the Arab countries’ individual and institutional investors.

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