All Change

Capital Markets

The merging of Turkey's various capital markets under the aegis of Borsa Istanbul is aimed at readying the local industry to play a bigger role in international liquidity flows.

Although 2013 started the year off well on the back of investment grade ratings from Moody’s and Fitch for Turkey’s sovereign rating, with the BIST-100 climbing to 93,178.87 by late May, showing a steady 19% gain for the year, the market fell off a cliff soon after, following threats to end the role of quantitative easing by the US Federal Reserve. Not helping the market was the role played by the Gezi Park protest movement, which soured international market sentiment toward Turkish assets, and saw hot money flows leaving the country. Following a weekend of intense nationwide clashes between police and protestors, the BIST-100 lost 11.68% on June 3, as investors began to vote with their feet. The BIST-100 ended 1H2013 17.6% down from the highs it recorded in late May, giving up its gains over the year and more and ending up at the 76,736.59 level, 1.8% below the YE2012 result. Total market capitalization was $270.66 billion at the end of 1H2013. While companies on the Borsa Istanbul saw a favorable reaction to the re-ratings story from Fitch and Moody’s over the earlier part of the year, it became clear that the Gezi moment was seen as a useful signal for profit taking. With a more risk-averse market developing globally, the macro fundamentals behind the Turkish story will be more closely examined by investors, especially in terms of exchange-rate risks and interest rate levels.

In terms of foreign holdings, some 63.6% of listed stocks were owned by non-Turkish nationals at the end of 1H2012, down slightly on the 66% recorded in April of the same year. In year-to-date terms, some $563 million was pulled out of the market by foreign nationals by 1H2013, though most of that reverse occurred in June, when $1.2 billion was removed from the market. The most sold stocks during the June sell off were mainly financials, with Halkbank and İşbank the main losers at $219 million and $203 million, respectively.

While the IPO market has been sluggish in company number terms so far in 2013, with just seven IPOs launched in the first half of the year, the $676 million raised on the market managed to see the record for the largest IPO in 2 years broken on two separate occasions. This compares favorably to the 26 IPOs launched in 2012, 27 in 2011, and 22 over 2010, which combined raised some $3.5 billion. The biggest IPO so far in 2013 has been Pegasus Airlines, which managed to float a 35% stake on the exchange and raise $361 million in late April, giving the company an overall market cap of some $1 billion. The low-cost airline decided to list on the Borsa Istanbul in order to help fund its expansion ambitions, including plans to purchase another 100 A320 narrow-bodied aircraft to bolster its domestic and international short-haul presence. The other large IPO of the year was held earlier in February, as Turkey’s largest listed state bank, Halkbank, partially floated off its real estate investment trust (REIT) unit, Halk GYO. The 28% stake offered to the market brought in $141.7 million, and helped test the waters for the Pegasus IPO, held two months later.

Borsa Istanbul is actively engaging with companies across Turkey to find new candidates appropriate to go down the IPO road, with 130 of the top 1,000 companies not listed on the exchange being visited by representatives of the exchange over 2012. As of end-1H2013, 401 companies were listed on the Borsa Istanbul, including 234 on the main national market, 79 on the secondary market, and 28 REITs.


The introduction of a new Capital Markets Law in 2012 has seen the start of the merger and restructuring of Turkey’s debt, equity, and commodity markets. Under the law, the operations of the Istanbul Stock Exchange (IMKB), the Istanbul Gold Exchange, and the Turkish Derivatives Exchange (TURKDEX) will be merged under a joint-stock company to form Borsa Istanbul. The new shareholders in company will include the Turkish Treasury (49%), members of the IMKB (4%), Istanbul Gold Exchange members (0.3%), the Association of Capital Market Intermediary Institutions of Turkey (1%), and TURKDEX shareholders (5%). The remaining 41.6% of the shares in Borsa Istanbul will reside with the company itself for use in any future strategic relationship with other exchanges or investors.

Borsa Istanbul currently has 99 brokerage houses registered on its platform, 11 investment and development banks, and 29 commercial banks all counting as members. In terms of derivatives, these are handled by TURKDEX, based in Izmir. TURKDEX will formally join the Borsa Istanbul in August 2013. Over 2012, some TL404 billion in contracts were traded over the TURKDEX exchange, with equity index contracts, especially futures, forming the bulk at TL376 billion, or 93% of all contracts.

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