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ALI IHSAN DILER ISTANBUL STOCK EXCHANGE

THE IMPORTANCE OF CAPITAL MARKETS IN THE DEVELOPMENT OF INDUSTRIAL SECTOR (CASES OF TURKEY&SERBIA). ALI IHSAN DILER ISTANBUL STOCK EXCHANGE. VI. International Belgrade Stock Exchange Conference 15-16 November - Belgrade. IMPORTANCE OF CAPITAL MARKETS. Capital Markets provide

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ALI IHSAN DILER ISTANBUL STOCK EXCHANGE

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  1. THE IMPORTANCE OF CAPITAL MARKETS IN THE DEVELOPMENT OF INDUSTRIAL SECTOR(CASES OF TURKEY&SERBIA) ALI IHSAN DILER ISTANBUL STOCK EXCHANGE VI. International Belgrade Stock Exchange Conference 15-16 November - Belgrade

  2. IMPORTANCE OF CAPITAL MARKETS • Capital Markets provide • Long term capital for investments • Liquidity for the security holders • Elimination of term mismatch • Reputation for companies

  3. CHARACTERISTICS OF A GOOD MARKET • Availability of information for all market participants • Disclosure Policies • Corporate Governance • Liquidity • Price Contiunity • Price contiunity requires depth • Minimal Transaction Costs

  4. TURKISH EXPERIENCE

  5. Sectorial Breakdown of Turkey’s GDP(% of GDP)

  6. IPO Amounts($ billion)

  7. Sectorial breakdown of IPO Amounts (1998-2007)

  8. Secondary PO Amounts($ million)

  9. Sectorial breakdown of Capital Increases (Rights Issues) in ISE (% of Total)

  10. Sectorial breakdown of Market Value in ISE($ billion)

  11. Sectorial breakdown of Trading Volume (# of Shares) in ISE (% of Total)

  12. Sectorial breakdown of Traded Value in ISE($ billion)

  13. First 500 Industrial Companies of Turkey • Every year Istanbul Chamber of Industry makes a research for the first 500 Industrial Companies of Turkey. • 105 of the first 500 industry companies are traded in ISE. • 34 of these companies are in the first 100.

  14. Share of ISE Companies in the first 500 Industrial Companies of Turkey

  15. Beginning Phase of the ISE • ISE was established in 1986 • No institutional investor at the beginning • Few brokerage houses • OTC was a big rival

  16. Evolution of the ISE • Removing the restrictions from international capital movements (1989) • For ISE Members, it is compulsory to make their transactions at ISE markets. (from 1986 onwards) • Mutual Funds and Investment Trusts were began to be established and their revenues are exempted from taxes • Listed companies have tax exemptions from their profit (till 1999)

  17. Evolution of the ISE • Also the capital gains obtained from the transactions on ISE were exempted from taxes till 1999. • Between 1999 and 2006, if the shares obtained from ISE are held for 3 months or more the capital gains from the sale of these shares were exempted from tax. • Since 2006 holding period was extended to 1 year. • Still only for individual foreign investors’ capital gains, from trading equity shares on ISE, are exempted from tax.

  18. Evolution of the ISE • Privatizations are made through ISE Whole Sales Market. • Privatizations increased the liquidity of the ISE markets. • Privatization Administration • played a market maker role in early 1990s. • Still using ISE Whole Sales Market for public offerings • Also can sell small amounts of securities in available market conditions

  19. Privatization Sale Methods (2001-2007)

  20. Evolution of the ISE • Financial Sector takes the biggest stake from the Capital Markets, but they give them as credits. • Banking sector’s standards was raised to International Standards after the 2001 crisis. • This improvement has increased the credit volume by the help of the economic conjoncture.

  21. Why is the stake of Industry not satisfactory in ISE? • Alternative finance resources • Although the domestic saving rates are at low levels, by the help of the banking reform in 2001, the banks and private sector could obtain loans from foreign banks.(Appreciation of Lira is the main driver) • Informal Economy

  22. SERBIA • Strong real growth rates in last years • Declining Inflation to single digits • Appreciation of local currency RDS Source:National Bank of Serbia

  23. Sectorial breakdown of BELEX15 Source: http://www.belex.co.yu/index-e.php

  24. FEDERATION OF EURO-ASIAN STOCK EXCHANGES (FEAS) REGION

  25. Number of Respondents Source: FEAS Research&Development Task Force Report “FEAS Region IPOs” (September 2007)

  26. Incentives for Publicly Held Companies Source: FEAS Research&Development Task Force Report “FEAS Region IPOs” (September 2007)

  27. IPO & Privatization Source: FEAS Research&Development Task Force Report “FEAS Region IPOs” (September 2007)

  28. Effect of Privatization to Capital Markets Source: FEAS Research&Development Task Force Report “FEAS Region IPOs” (September 2007)

  29. Macro Economic Conditions Source: FEAS Research&Development Task Force Report “FEAS Region IPOs” (September 2007)

  30. Level of Domestic Deposits Source: FEAS Research&Development Task Force Report “FEAS Region IPOs” (September 2007)

  31. Crowding Out Effect Source: FEAS Research&Development Task Force Report “FEAS Region IPOs” (September 2007)

  32. Equity Culture Source: FEAS Research&Development Task Force Report “FEAS Region IPOs” (September 2007)

  33. Fear of Losing Company’s Control Source: FEAS Research&Development Task Force Report “FEAS Region IPOs” (September 2007)

  34. Taxes Source: FEAS Research&Development Task Force Report “FEAS Region IPOs” (September 2007)

  35. Informal Economy Source: FEAS Research&Development Task Force Report “FEAS Region IPOs” (September 2007)

  36. SUMMARY TABLE

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