Message from the Chairman
We have left behind year 2016, in which political and economic uncertainties increased across the world; US and European economies and especially economies of developing countries showed significant segregation in performance. Expectations for a new interest rate increase from FED and realization of such increase at end-2016 negatively influenced the financial markets of developing countries while leading to a significant volatility on the side of the currency and interest rates. In our country, financial markets followed a more fluctuating course compared to those of other developing countries especially after the treacherous coup attempt which took place on the night of July 15, 2016 and was successfully suppressed by the brave and self-scarifying resistance of our citizens and security forces. Despite the problems in our region and around the world, Turkish economy continued its growth trend in 2016 thanks to the maintenance of political stability and implementation of appropriate fiscal and monetary policies.
In spite of the negative events in Turkey and in our region, the traded value in Borsa İstanbul markets increased significantly in 2016. Our total traded value has reached over 13 trillion TL with an increase of 9% in 2016 compared to the previous year. In this period, in which risk perception directed at developing markets has changed, increase in traded values and in the foreign investors’ share in the total equity traded value within the last year, clearly indicate that, independent from time and economic developments, Borsa İstanbul and Turkish capital markets are a safe harbor for investors. Borsa İstanbul is taking firm steps forward to becoming a regional and global finance center by means of transition to BISTECH technology, different products we offer in our markets and new projects and applications accomplished.
Doubtless, as Borsa İstanbul, one of our greatest targets is to bring together our investors with our companies and to provide the finance the companies need to grow through the most appropriate instruments and in the most efficient manner. We can say that 2016 was a successful year in this sense. The financing which private companies provide by issuing corporate bonds has increased continuously in recent years, even though public offerings in the equity market are going through a depressed period due to the increased uncertainties on the global level. 517 bonds were issued and the amount of share capital issued was 66.4 billion TL in 2014, while 621 and 766 bonds were issued and amounts of share capital issued reached 79.2 and 90.8 billion TL respectively in 2015 and 2016. Statistics reveal Turkish companies have ensured a fund of estimated US$ 90 billion through private sector bonds and lease certificates in the last three years only. Mentioned developments indicate that our debt securities market has reached a product range and depth beyond government debt securities.
Borsa İstanbul continues to offer opportunities to companies that have growth potential but that are not able to raise funds through public offering or through issuing debt securities. A membership and web based platform bringing together companies and qualified investors for the purpose of trading shares without going public, Borsa İstanbul’s Private Market has 376 members with a hitch of 36% in 2016. A total of 10 investment transactions, 6 risk capital investment and 4 angel investments were achieved in the last year. We believe public offerings will be influenced positively from these developments in terms of both number and amount, in the medium and long term, in consideration of the fact that the total turnover of the member companies, which include Istanbul Chamber of Industry’s (ISO) top 1000 Turkish companies, has reached a figure of 5 billion TL by 2016 year-end.
During 2016, we have introduced important practices to encourage initial public offerings in Borsa İstanbul while our promotion efforts continued. We made significant discounts in the annual listing fees in 2016. Within this context, 1 basis point charged over the capital, an item used in the calculation of annual listing fee, was reduced to 0.5 basis points. Profit amount of the companies which earn period income, also dividend amounts distributed by dividend paying companies are deducted from market capitalization, another item in calculating the annual listing fee. Thus, discounts up to a rate of 70% and amounting to 300 thousand TL per company were provided. Likewise, a discount of 50% was implemented on initial listing fee of lease certificates. We are targeting to attract particularly large scale companies in ISO-500. On the other hand, we are in touch with foreign companies for cross-listings. We believe that growth and deepening of the capital markets will be realized thanks to good examples and successful public offerings will lead an increasing number of individual and institutional investors to join the capital markets and contribute to making Istanbul an international financial center.
On the other hand, we organized meetings and events in cooperation with various non-governmental organizations, particularly chambers of industry and commerce, promoting Borsa İstanbul markets and the instruments traded on such markets to potential issuers. In 2016, we have interviewed a total of 106 companies, 65 domestic and 41 foreign, within the scope of one-to-one company visits. Information was shared with respect to opportunities offered by Borsa İstanbul, public offerings and trading process in Borsa İstanbul. The number of companies which have been interviewed one-to-one since 2012 reached close to 1,000 with these visits.
We are aware that the success of a securities exchange is closely related to the diversity of the product portfolio it offers to investors and companies. Therefore, during 2016, we have strived to introduce new instruments and markets and thereby to fulfill the demands of all investors and issuers. Futures and options contracts based on 10 new share certificates and physical delivery based Anatolian Red Wheat and Durum Wheat futures contracts started to be traded in Borsa İstanbul’s Derivatives Market (VIOP) in February 2016. We extended our product portfolio in debt securities also, with Borsa İstanbul Money Market and Negotiated Repo Deals Market going into operation.
In 2017, we will introduce new financial instruments and continue to make the steps that will enlarge and deepen our market. We are carrying out work with the related stakeholders on financing real estate and urban transformation projects through real estate certificates, which will revive the construction sector and its side sectors, the locomotive power of the Turkish economy. On the other hand, we are aiming to make our investors partners in the economic growth and development of our country by way of lease certificates which will be issued by using the income from infrastructure projects referred as mega-projects of Turkey. We are also adopting the regulations required for these instruments to be traded in Borsa İstanbul markets.
Another important development for 2017 will be putting into operation the new gold custody center with 1,600 tons capacity. Thus, we will be able to carry further our work with the Central Bank of Turkey and other banks, and especially bring back our gold reserves stored in London. In addition to that, in line with Istanbul International Financial Center vision, we believe that it should be possible to trade currencies other than the Turkish Lira. As this step is realized, an increased number of foreign investors will prefer Turkey for their investments, while our product portfolio is widened. Our efforts on the area of Islamic finance, growing all over the world, are in progress. Along with the establishment of the International Interest-Free Finance Consultancy Board, we will have made a significant step towards ensuring standardization in Islamic finance. We are confident that this step will support the product diversity in this area.
Doubtless, any securities exchange seeking to become a prominent financial center in its region and globally must enter into cooperations that will contribute to its international effectiveness and brand name, while making it a center of attraction for global investors and companies. Within this framework, having entered into important strategic cooperations with Nasdaq and the European Bank for Reconstruction and Development (EBRD) since 2013, Borsa İstanbul has built a strategic cooperation with the Islamic Development Bank in 2016 to make the best of the potential we have in the region, assume a leading role in the fast developing field of Islamic finance and open up for large capital investors from the Gulf region. With the mentioned agreement, Borsa İstanbul shall continue to produce projects and work with three international business partners from three continents to help elevate Turkish capital market to the level worthy of our country’s economy.
2016 was a year when the full integration of the Turkish capital markets institutions was achieved. Following the enactment of the new Capital Markets Law in 2012, numerous steps towards the vertical integration of institutions were made. With their renewed corporate images, Istanbul Settlement and Custody Bank Inc. (Takasbank) and Central Registry Agency Inc. will continue their business operations in Borsa İstanbul campus in the upcoming period. The fact that these three institutions will carry out their operations under the umbrella of Borsa İstanbul Group is a very important step in implementing organizational and physical integration, which is the final stage of vertical integration. In this way, we have the ability to serve all our stakeholders much faster and more effectively.
Borsa İstanbul and the other capital markets institutions aim at offering capital markets at international standards that will allow Turkey to grow and contribute to increasing the welfare of our citizens. We do not forget for a minute that our greatest obligation and responsibility is towards our people when we take steps aimed at companies, investors and other stakeholders. The reason we converted all our cash assets into Turkish Lira in a period of high fluctuation in exchange rates should be evaluated within this context.
Borsa İstanbul was the only financial institution to be occupied during the treacherous coup attempt directed at the bright future of our country on the night of July 15 and has become a symbol for the blow attempted to strike the economic stability of Turkey. The sacred resistance shown to coup plotters by our citizens and security forces both across Turkey and in Borsa İstanbul deserves huge credit. I would like to take this opportunity to wish that our brothers, Mehmet Şevket Uzun and Fatih Satır, who were martyred while fighting against the traitors at Borsa İstanbul, may rest in peace and wish the best for those wounded during the resistance. We shall continue our operations with this awareness and determination as the executives and employees of the institutions which are critically important in shaping the economic future of Turkey. We fully believe we will have the greatest support from our valuable stakeholders and colleagues in this process.
Chairman of the Board and the Executive Committee