Germany-based Deutsche Borse and Turkey’s Istanbul Stock Exchange (ISE) have signed an agreement to support each other in developing their respective securities markets, such as joint research projects and marketing activities in Germany and Turkey.
The companies aim to cooperate on joint indices and product development to support closer cooperation between both Frankfurt and Istanbul.
Deutsche Borse executive board member responsible for the Xetra business area Frank Gerstenschläger said Deutsche Borse and ISE have already initiated a number of activities to facilitate the development of communication channels and to build up a continuous relationship between the parties for the respective benefit of the securities markets in Germany and in Turkey.
ISE CEO Huseyin Erkan said that the Turkish economy and financial markets have developed rapidly in recent years and continue this positive trend. With its initiative to actively promote the Turkish capital markets among the international audience the ISE takes an important step towards fostering this growth.
via Deutsche Borse, Istanbul Stock Exchange sign cooperation deal – Banking Business Review.
Although they command only 5% of the market share in Turkey, “participation banks” see room for growth.
By Henry Shapiro for Southeast European Times in Istanbul – 01/07/11 photo
The Istanbul Stock Exchange opened an index on Sharia compliant banks and companies this year. [Reuters]
Earlier this year, the Istanbul Stock Exchange launched an index of Sharia compliant banks and companies. Since then, the emergence of “Islamic banking” — also known as “participation banking” — has garnered considerable media attention.
It has been widely reported that these banks do not charge interest, or “riba”, because it is forbidden according to Islamic law. The actual mechanisms by which the banks operate, however, and the ways in which they differentiate themselves from the mainstream financial sector, remain poorly understood.
Four participation banks are currently operational in Turkey: al Baraka, Bank Asya, Kuveyt Türk, and Türkiye Finans. Like mainstream financial institutions, these banks offer a wide range of services, including savings and checking accounts, house and automobile financing, and even Islamic bonds, or “sukuk”, offered through Kuveyt Turk.
But for each of these services, an alternative mechanism has been developed to make profits without violating Islamic law regarding transactions and trade.
For example, customers with savings accounts at participation banks do not receive monthly interest payments at a certain rate. The banks use funds to supply goods and services directly according to a profit/loss investment model.
Savings funds are invested in tangible goods, real estate, or industry, and at the end of the month profit and loss is shared with the customer. A profit margin is not guaranteed, and no investment is made in companies dealing with pork, alcohol, or other banned commodities, according to the Participation Bank Association of Turkey.
Whereas car financing at a conventional bank entails a loan repaid with interest, Kuveyt Türk buys automobiles on behalf of customers, then sells them in installments at a higher price. Instead of charging interest, they see the transaction as buying and selling at a profit.
Currently, about 5% of deposits, assets and loans in Turkey are held by participation banks, but the Participation Bank Association of Turkey foresees massive growth.
The assistant to the association’s General-Secretary Osman Nihat Yılmaz told SETimes that he predicts participation banks’ market share to double in size, reaching ten percent in the next ten years.
According to Yilmaz, participation banks in Turkey faced the current financial crisis “from a sound position”.
“The banking sector in Turkey is more resilient compared to Western banks,” he says, because of precautions made after the banking crisis of 2001. Moreover, he said participation banks in particular do not “get interest risk because we don’t deal in interest transactions”.
Turkish participation banks now control a very small share of the total assets held in Islamic banks worldwide, approximately ninety percent of which are held in Iran, the Persian Gulf, and Malaysia, according to The Banker.
Yilmaz says that Islamic banking is aimed primarily at conservative people in Turkey, which he describes as consisting of twenty percent of the Turkish population, adding that “it may rise to 40 or 50”. But he admits that participation banks need to persuade target segments as well other people about the banks’ services
When asked whether or not instability in the Middle East created an opportunity for Turkish banks to increase their market share, Yilmaz told SETimes, “we worry for our neighbours” and don’t want to profit at their expense.
But someday “we want Istanbul to become the centre” of banking in the Middle East, he added.
This content was commissioned for SETimes.com.
via Islamic banking offers a different model (SETimes.com).
Commenting on foreign investors exiting the market, İstanbul Stock Exchange (İMKB) President Hüseyin Erkan has said that foreign investors only represent the 16 percent of the bourse and therefore a capital outflow of $1.6 billion is not cause for concern.
İMKB President Hüseyin Erkan
Erkan spoke during the general assembly of the İMKB on Monday and underlined that he was very impressed with the interest shown in the benchmark index (İMKB-100). Also touching on the hot topic at the moment, he said that foreign capital outflows had been witnessed in the İMKB, Erkan noted that foreign investors had purchased stocks with a total value of $2.1 billion in 2010 whereas foreign investors’ total sales in the first five months of this year amounted to only $1.6 billion. “These numbers are really nothing to worry about. The total share of foreigners in our bourse is only 16 percent. I cannot understand people yelling that foreigners are leaving the country or that they are manipulating the market. These are all lies and misleading interpretations,” Erkan said.
Last Friday Turkish shares reached their lowest level in almost three months due to concerns that the central bank is failing to take the measures required to rein in the country’s widening current account deficit. Despite the credit rating upgrades by international rating agencies and despite analysts sharing a common view that Turkey’s credit rating could be increased to “investment grade” after the general elections, the İMKB-100 tumbled by 915.71 points, or 1.5 percent, to 61.491 points at 5:30 p.m. on Friday, the lowest since March 8 after American investment bank JPMorgan Chase & Co. cut the rating of the country’s stock market to “underweight” from “overweight,” citing a growing current account deficit and reduced profit forecasts for banks.
The central bank has increased reserve requirements of banks four times since December to help curb the lending that is being used to buy imported goods and widen the current account gap. Annual loan growth is exceeding 35 percent currently compared with the central bank target of 25 percent, banking regulator data published on Friday confirmed.
Foreign investors: Good or bad?
It has been debated many times whether the İMKB will be dominated by foreign investors and whether they would exit Turkey when they reached their projected profit. Ahmed Münir Bulut, a dealer at participation bank Türkiye Finans, said in a previous statement to Today’s Zaman that foreigner investors are considered long-term investors compared to domestic ones and do not leave the market unless there is a serious problem, such as political tension, that could cause instability. Bulut added that he sees no risk from foreign investors having a high or low percentage of the Turkish market as long as there are no shocks in or outside Turkey.
Analyst Abdulkadir Çakır points to a different issue and says the decline or increase of foreign investors’ shares in the İMKB will not be enough to give the whole picture. He believes there is a big difference between long and short-term investors. “In order to analyze this issue, a distinction should be made between long-term investors such as pension funds, which are more risk averse, and short-term investors like hedge funds, which are more risk seeking,” said Çakır. “Short-term investors are seen as risky investors that use high leverage, a way in finance to multiply gains or losses. A well-known example of a short-term investor case is the mortgage crisis in 2008 where these investors walked away from the Turkish market immediately after news of the bankruptcy of Lehman Brothers hit the headlines in the US. The market reacted negatively to this ‘money flight’ and a fast decline in the market was unavoidable.”
DO&CO is specialized in airline catering. Hürriyet photo
DO&CO Restaurants and Catering, one of the world’s leading companies in airline and international events catering, has received a record demand to be traded on the Istanbul Stock Exchange, or ISE.
The company received demand worth 1.14 billion Turkish Liras from domestic and foreign markets last Thursday and Friday, according to a statement Tuesday from the company.
A total of 26.1 million demands from 1,084 investors have been collected for a total of 2.7 million shares.
Shares of the company are expected to start being traded on the ISE with DOCO code this Thursday.
The company, which was established by Attila Doğu, a Turkish businessman in Vienna in 1981, first began trading on the stock exchange of the Austrian capital.
DO&CO’s 47.05 percent shares will be opened to public. The company will publicly offer shares totaling 28.9 percent of the company on the ISE and 18.15 percent on the Vienna exchange.
Turkey’s market regulator will increase fines and jail sentences for share manipulation and insider trading on the Istanbul Stock Exchange, Haberturk reported, citing Capital Markets Board Chairman Vedat Akgiray.
Akgiray said gains from such crimes will also be confiscated through changes the regulator will make in the capital markets law, according to the Istanbul-based newspaper. The current law orders two to five years jail sentences for those convicted of manipulation and insider trading, it said.
Akgiray also said partners and senior executives will not be able to sell shares of their company before three months from the date of purchase, Haberturk reported.
To contact the reporter on this story: Aydan Eksin at aeksin@bloomberg.net
To contact the editor responsible for this story: Mark Bentley at mbentley3@bloomberg.net
via Turkey to Increase Penalties for Insider Trading, Haberturk Says – Bloomberg.
Lucrative days in capital markets have led to successive initial public offerings (IPO) these days, with the number of public offerings expected to exceed 30 by the end of this year.
The IPO movement has been fruitful so far and is expected to attract a total number of 30 new companies to the İMKB in 2010.
The İstanbul Stock Exchange (İMKB) and the Capital Markets Board (SPK) started an IPO campaign in May under the auspices of the government in order to increase the number of companies listed on the bourse. Following Torunlar GYO, one of Turkey’s largest real estate investment partnerships, İhlas Yayın Holding and Katmerciler have been offered to the public over the last three weeks.
It seems that the spring season in IPOs will continue as the markets move upward. But what is an IPO and how does the market work in Turkey? When a company reaches a certain stage in its growth, it may decide to issue stock to the public, known as an IPO. The goal may be to raise capital or to provide liquidity for existing shareholders as well as a number of other reasons.
According to the İMKB, there are two markets for trading stocks on the İMKB: the stock market and the Emerging Companies Market (ECM). Companies to be traded on the stock market may choose to offer part of the stock representing existing capital through the sale of shares or to increase capital, restricting the pre-emptive rights of shareholders, or apply both methods concurrently.
The shares eligible for trading on the ECM include those issued by joint stock companies in capital increases by partially or fully restricting the pre-emptive rights of the shareholders, and in the case of secondary offerings, the shares acquired by exercising the rights attached to such shares. The shares of current shareholders that are not included in the ECM directory may not be traded on the primary or secondary market of the ECM; yet, there are no restrictions on the purchase of the shares by the present shareholders from the ECM primary or secondary market and subsequent sales thereof. This restriction aims to channel the funds raised by issuing shares on the ECM to the company and directly contribute to the financial structure of the company.
A frequently asked question arises when the number of IPOs is increasing. Is there enough demand that can support the companies rising on the İMKB day by day? It is true that some companies create demand for their own shares, only to have the İMKB slump afterwards, as evinced by İMKB data. When considering the previous periods in the İMKB where the number of IPOs skyrocketed, the İMKB data show the bourse indices started ebbing. Time periods like the years 2000 and 2007-2008 are some examples of this case when the bourse steeply declined.
Whether the same tendency will prevail again is a matter of question, though. Experts say it is too early to talk about a downturn in the market. Furthermore, many companies are waiting their turn to be traded on the İMKB, which means new entries to the bourse are not over yet.
Campaign calls companies in
The İMKB and SPK have started a campaign that aims to increase interest in IPOs and the number of companies traded on the İMKB to 1,000 by 2023. SPK President Vedat Akgiray said more than 40 companies have applied for an IPO this year, making 2010 the year with the highest number of IPOs launched in Turkey. Akgiray pointed to current economic data and said that Turkey’s gross domestic product (GDP) has reached 1.5 percent of the world’s GDP, but when looking at the İMKB, it only represents 0.4 percent of the entire volume of the world’s stock exchanges. He said they have the responsibility to increase this stake and have therefore started a promotion to attract more companies to the İMKB. The SPK president stated that there are more than 300 companies listed on the İMKB and that by 2023 they want that figure to reach 1,000.
Current İMKB data show that 18 companies launched IPOs between January and November of 2010. Lokman Hekim Hospitals applied on July 5 for an IPO to trade 20 percent of its paid-in capital of TL 11.13 million. Approximately one month later, on Aug. 17, Emlak Konut GYO applied to float 25 percent of its paid-in capital, a total of TL 2.5 billion. Akfen GYO, Global Securities and Despec Computer all applied for an IPO to trade 28.75, 33.33 and 39.35 percent of their paid-in capital.
The price of one share of Uyum Food, a large supermarket chain, was set at TL 8.75 and a pre-IPO was conducted on Nov. 4-5. Investors showed strong interest in the food company, which expects to raise TL 52.5 million in capital. The company’s general manager, Sait Koç, said they will use these funds to open more stores. He added that the food sector will be dominated by 10 big chains in 10 years’ time and that they therefore aim to grow through the IPO. Koç noted that they expect to have 73 stores in 10 years, up from their current 33.
Investors also showed strong interest in the Katmerciler pre-IPO, which was held on Nov. 3-5. A total of 3,122 investors applied to buy a share in Katmerciler — a nominal demand of TL 9.29 million. According to the Public Disclosure Forum (KAP) of the İMKB, 85 percent of the current demand for Katmerciler, where the IPO price is listed as TL 6, was from domestic individual investors. A 24 percent share of Katmerciler started to trade on the İMKB on Nov. 11.
