BROKERAGE INDUSTRY &BROKERAGE INDUSTRY &INVESTMENT SERVICES IN TURKEY

GERMAN EQUITY FORUMGERMAN EQUITY FORUM

N b 22 2011 F kf tNovember 22, 2011 Frankfurt

Contents

TSPAKBTSPAKB

Financial IntermediariesFinancial Intermediaries

Economy & MarketsEconomy & Markets

The FutureThe Future

2

TSPAKB Founded in April 2001 by law, as a self-regulatory p y , g y

organization. The Association currently has 143 members:

102 brokerage firms

1 derivatives brokerage firm

40 banks

We; Regulate and oversee the intermediaries,

Issue licenses to market professionals,

Off t i i Offer training programs,

Publish a variety of research,

Cooperate with foreign institutions Cooperate with foreign institutions.

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Financial Intermediaries

Brokerage Firms

D i i

Banks

D i i

Derivatives Brokerage Firms

D i i• Derivatives Market

• Fixed Income

• Derivatives Market

• Fixed Income

• DerivativesMarket

Fixed IncomeMarket

• Equity Market

Fixed IncomeMarket

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Brokerage Firms

There are 102 brokerage firms and 1 derivatives brokerage firm. 90 of them are active, 13 of them are dormant as of today.

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Foreign ownership increased significantly after 2005.

Revenue Structure (2011/06)

Commissions are the major revenue source for the industry.

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Brokerage commissions were liberalized in 2006.

Background The Turkish Capital Market Board and the Istanbul Stock The Turkish Capital Market Board and the Istanbul Stock

Exchange were established in 1982 and 1986, respectively.

Turkey struggled with chronic double-digit inflation, highdeficits and political uncertainties during the followingtwo decades.

These factors caused high volatility and gigantic nominal d l i t t tand real interest rates.

As a protection against inflation, investors shifted toforeign exchange and gold type assetsforeign exchange and gold-type assets.

The development of the Turkish Capital Markets wereseriously hindered by the aboveseriously hindered by the above.

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GDP (billion $)

649

742

617

735

481526

230

305

390

197 230

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Turkey is the 16th largest economy in the world.

In the last decade, average growth rate has been 5%. In 2010,

00 00 003 00 005 006 00 008 009 0 0

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In the last decade, average growth rate has been 5%. In 2010, it was 9%. Expectations are around 6-7% for 2011.

Growth

Turkey’s share in global GDP increased from %0.8 to %1.1 in the last decade.

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Turkey is expected to grow faster than the developed countries.

I fl tiInflation95%

65%

75%

85% CPI

PPI

45%

55%

65%

15%

25%

35%

-5%

5%

15%

2002 2003 2004 2005 2006 2007 2008 2009 2010

Inflation came down from above 70% to around 7% in thel d dlast decade.

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P bli D btPublic DebtNet External Debt/GDP

28%25%

/

Net Domestic Debt/GDP

25%17%

13%6%

4% 3%

39% 36% 38% 36% 35%30% 28% 30% 28%

4%1% 2%

3%1%

30% 28% 26%30% 28%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Public Debt/GDP declined from 70% to around 30% in thel

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

last 10 years.

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Challenges The size of the Turkish capital markets is not in line The size of the Turkish capital markets is not in line

with the size of its economy. Only 15% of the largest 1.000 companies are listed. Only 15% of the largest 1.000 companies are listed. Market capitalization is low.

Average free-float rate is 25%. g

Product diversity needs to be improved further. Investor base is low.

1 million equity investors among a population of 74 million.

Current investor generation is still under the influence of the pre-2000 economic and political instability period.

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Number of Listed Companies (2011/10)

There are 358 companies listed on the Istanbul Stock Exchange.

ISE ranks 28th among 51 WFE members in number of listed

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ISE ranks 28th among 51 WFE members in number of listedcompanies.

Domestic Market Capitalization (2011/10, Billion $)

Market capitalization is around $ 240 bn. Mcap/GDP is 30%.

ISE is the 29th exchange among 51 WFE members in Mcap

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ISE is the 29th exchange among 51 WFE members in Mcap.

Equity Trading Volume (2011/10, Billion $)

Liquidity is the major strength of our market. ISE ranks 19th among 51 WFE members in trading volume.

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g g Domestic retail investors provide 70% of the liquidity.

Opportunities Young and vibrant generation: 51% of the Young and vibrant generation: 51% of the

population is below the age of 30. Economic stability and growth. Economic stability and growth. Increasing interest from foreign asset management

companies, brokers, investment banks.p , , Introduction of new products and services. Very low penetration of investment products. y p p Cooperation of capital market institutions for major

projects.

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Current Reforms

Istanbul RegionalIstanbul RegionalIstanbul RegionalFinancial Center

Istanbul RegionalFinancial Center

IPO CampaignIPO Campaign

Investor EducationInvestor Education

New ProductsNew Products

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Istanbul Regional Financial Center

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IPO CampaignMinor regulatoryg y

amendments and PR campaign.

24 IPOs completed as of October 2011.

9 more IPO applications areawaiting approvalawaiting approval.

85% of top 1.000 industrial companies are not listed yetlisted yet.

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Investor Education Roadmap

• In the light of the survey conducted by

Building a wide range of

educational

• Coordinated publicrelations activities

survey conducted by TSPAKB

Determining • For diverse needs

educational content

Publicity Determining the target

groups

• For diverse needs yCampaign

TSPAKB20

New Products

New ProductsNew Products

Warrantsa a s

Foreign Exchange

Electricity Futures

Islamic Bonds

Single Stock Futures

O ti

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Options

The Future

Improved Listings

Istanbul Regional Financial Center

Wider Investor

Base

Financial Center

Variet ofVariety of Investment Instruments

Market Reforms

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Th k Y !Thank You!Buyukdere Cad. No:173

1. Levent Plaza A Blok Kat:41. Levent 34394 Istanbul

Tel.: (90) 212–280 85 67Fax: (90) 212–280 85 89

info@tspakb.org.trwww.tspakb.org.tr