TURKEYThe 2012 guide to TURKEY · 2012-10-01 · 4 The 2012 guide to TURKEY The 2012 guide to...

> Turkish markets ripe for new investments> Rapid development of corporate finance > After 2011, valuations at attractive levels> TradeMaster allows investors to tap Turkey’s potential

The 2012 guide to

TURKEYThe 2010 guide to

TURKEY> Turkey emerges stronger from global crisis> Fiscal rule is awaited to put budget defi cit on autopilot> Turkish banking sets an example> Unrivalled investment house> New sources of investment New sources of investment

August 2010

Turkey-Guide-2010.indd 1 28/07/2010 13:52

August 2012

Turkey-Guide-2012 v7.indd 1 26/07/2012 15:22

2 The 2012 guide to TURKEY


The 2012 guide to TURKEY The 2012 guide to Turkey

conTEnTs

> Turkish markets ripe for new investments 4

> The delicate process of cooling down a red-hot economy 6

> Rapid development of corporate finance 9

> M&A scene robust private equity steps in 12

> After 2011, valuations at attractive levels 14

> No more confusion over monetary policy 16

> TradeMaster allows investors to tap Turkey’s potential 18

This guide is for the use of professionals only. It states the position of the market as at the time of going to press and is not a substitute for detailed local knowledge.

Euromoney Institutional Investor PLCNestor House, Playhouse Yard, London EC4V 5EXTelephone: +44 20 7779 8888 Facsimile: +44 20 7779 8739 / 8345

Directors: Sir Patrick Sergeant, The Viscount Rothermere, Richard Ensor (managing director), Neil Osborn, Dan Cohen, John Botts, Colin Jones, Diane Alfano, Christopher Fordham, Jaime Gonzalez, Jane Wilkinson, Martin Morgan, David Pritchard, Bashar Al-Rehany

Editor: Philip Ayers Designer: Ray HeathPrinted in the United Kingdom by: Wyndeham, Roche, UK

© Euromoney Trading London 2012. Euromoney is registered as a trademark in the United States and the United Kingdom.



The 2012 guide to TURKEY

In the past, Turkey’s neighbours, from the east to the west, enjoyed political stability while we were engulfed in chaos. Today, the situation is exactly the opposite”

A stellar growth of 8.5% in gross domestic product was not enough for Turkey to win the full confidence of global

investors last year, as the equity market underperformed and foreign capital flows remained at subdued levels. However, as the member G20 group economy is displaying remarkable resilience in the face of the eurozone turmoil, top executives at IS Investment observe indications that investors are moving to catch up.

Assessing the developments of the past year, Ilhami Koc, the visionary general manager of Turkey’s top investment house, notes that most foreign investors have shied away from long-term positions in Turkish equities, due to global uncertainties. “And this happened despite the very attractive prices and dividend yields,” Koc

says, explaining how equities failed to move in sync with the booming economy.

However, as the ratio of foreign ownership on the Istanbul Stock Exchange declined to around 62%, domestic investors were able to close the gap, boosted by an institutional investor base that has been enjoying the ride of a dynamic economy for the past decade.

For Koc, a man known for foreseeing and developing trends in the Turkish capital markets, this bodes well. “In the past, if foreign investors had exited the market in those volumes, the market would have collapsed,” he says, speaking among his top lieutenants at IS Towers, which rise in the heart of Istanbul’s financial district. “Today, we have a better balance between locals and foreigners - indicating that the local institutional investor base is strengthening.”

Another interesting trend has become the strength of bond issuances that more than made up for the decline in public offering of equities. “Corporates have thus started to fund themselves more from the capital markets,” Koc says. “In the past, this was

Turkish markets ripe for new investmentsIn 2001, Turkey performed second best in economic growth among the Group of 20 nations, but this performance has not been reflected adequately in the capital markets. Foreign investors kept their distance due to the eurozone turmoil. However, a decade of efforts to develop the capital markets in a sustainable manner is finally bearing fruit


5The 2012 guide to TURKEY


done mainly through initial public offerings (IPOs). Today, there’s a strong market for bond issuances.”

Foresight pays for Turkey’s top investment house IS Investment can rightfully claim some of the success, as it was Koc and his team that encouraged the development of this market years ago, be it through deals the investment house managed or through tireless research on the bond markets, at a time when market research was limited to equities and the macroeconomy.

A parallel trend is the increased sophistication of capital market products. TurkDex, the Turkish Derivatives Exchange,

has been expanding rapidly. Last year, its average daily trading volume stood at around $1 billion – over 132 times the amount in 2005. Meanwhile, relatively complex instruments such as warrants and exchange-traded funds (ETFs) have met promising interest from investors.

What underlies these trends is policy-makers’ efforts to streamline regulation, in line with the vision to turn Istanbul into a regional centre of finance. The government has prepared a revolutionary code of commerce that will introduce greater transparency and make it easier to do business. Ankara is also simplifying tax regulation, with the aim of making it more attractive for foreign funds to manage portfolios from Istanbul. Another policy initiative is to help the private pensions market grow, encouraging domestic savings.

“We have an economic management that works closely with the private sector,” Koc says, pointing toward the stability brought by successive Justice and Development Party governments since 2003. “In the past, Turkey’s neighbours, from the east to the west, enjoyed political stability while we were engulfed in chaos. Today, the situation is exactly the opposite.” He recalls the ever-changing faces of politicians at successive G-20 ministerial summits, while attendees from Turkey stay unchanged.

Ilhami Koc, CEO

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The environment of political stability, coupled with the economy’s key strengths such as a dynamic and experienced

entrepreneurial class and a young, booming consumer base, made Turkey the second fastest-growing economy in the G20 after China in 2011, and the third-fastest in the world.

“All this happened without any significant deterioration in the budget. There was no compromise from fiscal discipline,” says Serhat Gurleyen, IS Investment’s research director. The government’s finances performed exceedingly well last year, as the budget posted a deficit equivalent to only 1.4% of GDP while the overall public debt-to-GDP ratio was an enviable 42%.

“Thus, the recovery of Turkey’s economy was one that did not hurt public debt dynamics, a rare commodity in an environment where advanced economies face massive fiscal deterioration, as governments were forced to hike spending. In contrast, our growth is a private sector-led one,” Gurleyen explains. “The problem is

Turkey’s private savings rate of around 12% of GDP, while investments add up to around 22% of GDP. This savings deficit of 10% has to be financed by capital flows from abroad.”

As of April 2012, Turkey’s 12-month rolling current account deficit was $69.2 billion - sharply down from a year earlier, but still forecast to reach 8% of GDP. Since

Serhat Gurleyen, CFA, Director, Research

The delicate process of cooling down a red-hot economyHigh economic growth is a testimony to Turkey’s fundamental strengths, but it has exposed its weaknesses as well. With the help of a tighter monetary policy, economic expansion is cooling down, while global developments strengthen the perception that Turkey has ample room to manoeuvre regarding inflation and the current account deficit




April 2010, only 17% of the gap has been financed by foreign direct investment, as less stable portfolio investments have taken the centre stage.

So the problem is that Turkey spends more than it produces. But, on the bright side, the country has had no trouble with foreign financing, despite a eurozone that is in the grips of a painful recession. Analysts expect a serious downsizing in the European banking sector, but Turkish corporates and banks have been borrowing fairly easily - lenders have rolled over syndications to the rate of 150% in the past year. “Our credibility is impeccable,” Gurleyen says.

A second point of weakness is inflation, which remains at an annual rate of 8.3% as of May. “The unorthodox monetary policies that were introduced by the end of 2010 are partially responsible for this rate,” Gurleyen says. “As the Turkish lira weakened and interest rates fell, an inflationary shock came in 2011 and the annual rate reached 10%. Around three to four percentage points of this stems from FX passthrough – the weakening of the currency.”

Key beneficiary of the “reversal of super commodity cycle” Coupled with the ongoing global uncertainties, these weaknesses distorted investor perceptions to the point where record growth and domestic stability did not suffice. Turkish equities finished 2011 with the worst performance after Egypt - a country that has been experiencing political upheaval and chaos. The Turkish lira was the worst performer of the past year. And in the rate market, the post-October monetary tightening has meant that Turkey has ranked as the worst-performing country for bond investors.

Nevertheless, the markets have rebounded this year, and are expected to do much better as global risk appetite recovers. IS Investment predicts modest GDP growth of 3% this year, with the economy cooling down.

But the eurozone crisis is bound to last longer than previously predicted. “The southern, peripheral eurozone economies have huge competitive disadvantages compared to the north. To be able to compete, they will either cut salaries or the euro will have to devalue,” Gurleyen says. “The second big problem is that the European way of life is practically unsustainable. The EU-27 accounts for 7% of the global population, while it produces a quarter of global GDP. But it accounts for 56% of all social security and health care spending in the world. A single EU citizen receives social security and health care services that cost 10 times more than an average world citizen. Cash injections from the European Central Bank cannot solve this – they can only provide temporary relief for the markets.”

Meanwhile, economic growth in the United States is forecast to slow to around 2%, as the dynamic economies of Asia may suffer growth declines to around 6-8% per annum. For Gurleyen, these developments signal the end of the “commodity super cycle”, as the dominance of China on the demand side retreats.

The recovery of Turkey’s economy was one that did not hurt public debt dynamics, a rare commodity in an environment where advanced economies face massive fiscal deterioration”




“China’s economic growth has been based mainly on infrastructure investments, which raise demand for commodities such as steel, copper, coal and oil. But the country seems to be on the verge of moving toward a consumption-led model. Thus, the super cycle loses steam, and may even be reversing,” the top economist says.

Such a development would mean a colossal shift in global balances, and could even bring more instability over the short term. But for Turkey, it has a more imminent implication: a commodity price retreat would accelerate the recovery in external balances, while also helping tame infl ation.

“If this trend continues, the Turkish Central Bank would be immensely relieved,” Gurleyen says. “The Central Bank’s year-end infl ation estimate is 6.5% and the commodity developments support its argument. Currently, the Central Bank implements a tight monetary policy within

a very wide band. We foresee this band to narrow while its top boundary drops, as the odds of a looser policy increase.”

IS Investment analysts’ meetings with various company executives over the past months also signal concerns regarding slower growth, adding ammunition to the looser monetary policy argument. Indeed, Gurleyen expects the fi rst steps toward such a policy in a few months.

Regarding a spillover of further eurozone troubles, Gurleyen is confi dent that the eff ect will not be as much as feared. IS Investment has conducted research on how 17 developing economies could be aff ected by such a spillover, and Turkey ranked only eighth, despite its close ties with EU. “The eff ect on Turkey is calculated to be at around the same level as South Africa and Brazil,” Gurleyen says, noting increasing export diversifi cation of Turkish companies.

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Indonesia EU Risk Score




Between 2000 and 2007, the share of EU economies in Turkey’s exports stood at over 60%, but this rate has

declined to around 55% as of end-2011, as exporters penetrated the fast-growing markets of the Middle East, North Africa and the Near East. As they worked to finance their expansion into new territories, they tapped into the capital markets, unleashing a boom while the advanced economies seem to be in a long-lasting slump.

“Corporate finance has developed rapidly since 2010, boosted as borrowing costs declined to single-digit figures and the legal framework was strengthened,” says Basak Selcuk, the IS Investment assistant manager responsible for corporate finance.

Only two years ago, the market had a volume of just over 3.5 billion liras, and was IPO-based. But in October 2010, the banking regulator allowed lenders to borrow from the capital markets, predicting that such borrowing would reach around 51 billion liras.

As the door opened wide, corporate bond issuances in 2011 totalled 18.5 billion liras, with 58 transactions. In the first seven months of 2012, the figure reached 24.3 billion liras, with 111 issues. Thus, since late 2010, corporate bond issuance has soared to 44.8 billion liras in total, with banks accounting for the vast majority of the figure.

“As deposit banks offer the product also to individual investors, their bonds mostly have maturities of six months,” Selcuk says. Another factor for such short maturity is that liquid funds comprise most of the portfolio management firms in Turkey – by law, such funds cannot invest in securities of over 180 days of maturity.

Nevertheless, considering that in Turkey the average maturity of bank deposits is only 52 days, the ability to issue bonds provides an opportunity for lenders to fix mismatches between their deposits and loans. Investors in the bonds, meanwhile, enjoy higher interest rates than traditional deposit rates, attaining better protection against the threat of high inflation.

Rapid development of corporate financeAs Turkish firms fuel their expansion through loans, they are helping develop the corporate finance market, but it is banks that have led to an unexpected boom in this field. Since late 2010, banks have completed bond issuances worth nearly 40 billion lira. IS Investment leads the pack in arranging such issuances, having managed 34 corporate bond public offerings between 2006 and July 2012




Basak Selcuk, Assistant Director, Corporate Finance

“With the financial sector under tight regulation, it was only natural that financial firms lead the growth in corporate finance,” Selcuk explains. “But IS Investment also aims to put high-credibility corporates alongside banks in the picture, supporting the market and facilitating the creation of sectoral benchmarks.”

IS Investment leads the sector, having arranged 34 corporate bond public offerings worth 11.4 billion liras between 2006 and July 2012. The deals include a three-year maturity with fixed rate issuance for Bank Pozitif, the first such issuance for the Turkish private sector. The most recent deal arranged by IS Investment is a 300 million lira bank bond issuance by ING Bank in July.

Helping the market attain more transparency IS Investment also works in private placements and arranges club deals regarding corporate issuances, but it prefers public offerings, as they offer greater possibilities to help the market become more transparent.

“As the corporation makes a disclosure, it allows us to follow its finances continuously,” Selcuk says. “Investors have the option to review their investments and prepare an exit strategy if necessary. Being able to follow the security to maturity is crucial to develop this market further. We add all our public offerings to research coverage.”

As such, corporate bond offerings provide a bright spot for the Turkish capital markets. According to Selcuk, the 2012 volume could well reach 40 billion liras. IS Investment itself joined the boom, borrowing 100 million liras from the market. The bond issuances by parent Turkiye IS Bankasi, known as Isbank, totalled 5 billion liras last year and 4.7 billion liras in 2012.

The spread structure in the market is pretty stable, with government bonds providing the risk-free rate and large deposit banks adding 50 basis points to

Corporate finance has developed rapidly since 2010, boosted as borrowing costs declined to single-digit figures and the legal framework was strengthened”




that rate for typical six-month maturities. The Turkish corporate sector forms the third layer, adding an extra spread of 100-150 bps over bank issuances.

A new alternative in corporate finance has been Islamic bonds, known as sukuks. Turkish lender Kuveyt Turk has issued two dollar-denominated sukuks abroad, and it plans to issue such bonds in the domestic market. Albaraka Turk, another Islamic lender, has also applied to the regulator to issue sukuks. But the main driver of this market is the Turkish Treasury, which is expected to issue Islamic bonds mainly to tap into the investment potential of the energy-rich Gulf Cooperation Council economies.

“If the Treasury issues a sukuk, backed by public property that’s abundant in Turkey, it will probably be followed by others,” Selcuk predicts. “With a new regulation and newly-introduced tax advantages, this market has ample room for growth.”

IS Investment executives are excited over the future prospects of the corporate bond issuance market, as this method accounts for only 3-4% of corporate borrowing in Turkey, compared to over 8% in the United States and around 40% in the EU. Thus, catching up with European rates would mean a 10-fold growth for the local market.

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The financing bottleneck that came with the eurozone crisis has hurt mergers and acquisitions and postponed large scale private sector

deals in Turkey, but the effect was mainly observed in failed or delayed privatization tenders on fairly big state assets.

In contrast, the private sector displays signs of a more sustainable growth in M&A activity, as explained by Efsane Cam, M&A director at IS Investment.

The total volume of M&A deals reached $14.9 billion last year - a dramatic decline compared to 2010’s $23.5 billion. Privatization comprised only 14% of the total volume in 2011, down from an average of over 60% in the past few years. Cam

adds that two-thirds of all deals in 2011 were conducted by foreign investors. Twenty-five deals had a transaction size of over $100 million.

“We can talk about a limited market where energy, e-commerce, fast-moving consumer goods and health care were the sectors that stirred the most interest,” Cam says. “As has been the norm over the previous years, there was interest from EU countries. However, private equity funds and strategic buyers from the Gulf region and Far East have also completed some acquisitions.”

Cam, who has managed more than 40 deals since 2005, points toward the ongoing discrepancy between the sellers’ expectations and the buyers’ offers. “The gap remains wide due to demand from buyers for significant discounts resulting from foreign currency-related debt concerns, operational risks associated with future business plans and expectations that market conditions will worsen,” she explains. “The sellers, on the other hand, have mostly been bold in answering these concerns and not leaving room for negotiations concerning discounts.” The pricing at completed deals

M&A scene robust as private equity steps inUntil last year, the Turkish M&A scene was dominated by large-scale privatizations and private sector deals, but with the eurozone crisis, the picture has changed dramatically. As state asset sales stutter, acquisitions of small- and medium-scale Turkish companies go on at a steady pace, largely due to rising interest from private equity firms

Most private equity funds have studied numerous investment opportunities in Turkey and the region, and therefore have significant know-how and cash allocated for new investments”




shows this is a market in which the seller commands more leverage, thanks to the sound finances of Turkish companies, which have been enjoying a nearly-uninterrupted wave of growth for the past decade.

As of end of June 2012, 129 M&A deals were completed with a total transaction volume of $8.5 billion of which $7.7 billion were private sector M&A deals. Over 40% of this volume has been generated through one significant deal: the acquisition of Dexia’s Turkish unit Denizbank by Sberbank for 6.47 billion liras ($3.5 billion). Apart from this deal, the sale of stakes in TAV Airport Holding and TAV Investment Holding to Aeroports de Paris stands out. Numerous e-commerce companies have also been on the market, such as butigo.com, e-bebek and balerin.com. Furthermore, interest has continued in food and non-food retail.

The largest privatization deal that closed in the period is the takeover of Trakya Electricity Distribution Network by IC Ictas Holding for $575 million. Excluding privatizations, private sector M&A deal volume is expected to reach close to $15 billion in 2012. But if planned privatizations are completed, this figure may double, or even triple. The government’s portfolio includes precious gems such as energy distribution networks, sugar factories, highways and the two bridges over the Bosphorus. Should these tenders go ahead, they are certain to stir investor interest but, as Cam underlines, increased borrowing costs and financing problems globally could take a toll on the offers.

Private equity’s share in last year’s M&A deals stands at an impressive 26%, with the total deal size reaching $3.5 billion. Texas Pacific Group’s sale of spirits company Mey Icki to Diageo for $2.1 billion

accounts for a big chunk of the total.

“Most private equity funds have studied numerous investment opportunities in Turkey and the region, and therefore have significant know-how and cash allocated for new investments,” Cam says, predicting that Turkey will stand out as a prime investment market for private equity throughout this year.

The new Code of Commerce, which gradually comes into effect over a course of a few years, also has a detailed section on mergers/splits for the first time. Cam notes that as the playing field is defined more clearly, the law itself may act as a catalyst for M&A after a certain amount of time.

Efsane Cam, Director, M&A




As the IS Investment managing director for Turkish equity and derivatives, Serkan Aran is among the best-positioned

individuals to analyze trends and investor behaviour in the market. After the decline in equities last year, Aran sees valuations as presenting an opportunity for the investor, provided that uncertainties related to the eurozone are resolved.

“We witnessed an impressive rally in equities in the first few months of the year,” Aran says. “There were foreign capital inflows, but then some other foreign investors preferred to exit. In essence, the composition of the foreign investor in equities has been shifting – today there are more short-term investors.” The eight publicly-traded Turkish banks weigh heavily on the whole exchange, rendering the benchmark ISE-100 index more exposed to developments in the euro area.

However, European woes did not prevent Citigroup block-selling a 10.1% stake in Akbank, the second-biggest Turkish bank in terms of market capitalization. The $1.2 billion sale, completed on 25 May, is

regarded as a stamp of approval for Turkish banking and equities. Citi retains a 9.9% share in the lender.

“We foresee the gradual rise in foreign investor activity in the market to continue,” Aran says. “And if positive developments take place regarding the technical infrastructure, we could see a dramatic surge in foreign interest.” As of May, foreign investors’ share in equity trading volume stood at over 18%, while their ownership in Turkish equities was at just below 62%.

Aran underlines that the Turkish capital markets have to further align themselves with the global markets, especially regarding order types. He also suggests that the local borrowing-lending market should be more active, especially if TurkDex, the derivatives exchange, is to develop further.

Doing its part to attract more foreign investors into the market, IS Investment last year signed a cooperation agreement with US-based brokerage Auerbach Grayson. The agreement will help US corporate investors get exposure to Turkish equities, while also

After 2011 slump, valuations at attractive levelsTurkish equities suffered a slump in 2011, and this year valuations in the market present opportunities for investors. In response, short-term investors seem to develop a keener interest in the market. To encourage foreign investors to tap into the market, IS Investment last year signed a cooperation agreement with US-based brokerage Auerbach Grayson




benefiting from IS Investment research. The IS Investment office launched in Dubai serves a similar purpose.

“We have partnered with a brokerage in South Korea, and we are pondering the possibility of dual listing for our respective companies,” Aran says. “Being quoted in two stock exchanges would help immensely – we frequently face questions from investors on a given Turkish stock who wish to trade for a longer time and seek a gray market for this. A dual listing with South Korea would mean trading for 16-17 hours per day.”

Hedge fund interest in TurkDex Meanwhile, TurkDex offers unparallelled arbitrage opportunities, attracting high foreign interest. “They have more flexibility in regulations, which is important for foreigners,” Aran explains, noting an increasing interest from hedge funds. The stamp of approval for TurkDex from the US Commodity Futures Trading Commission in late 2010 has been a breakthrough. The derivatives exchange predicts a 20-25% annual rise in trading volume for the next decade.

However, the lack of options trading, which would allow investors to trade volatility itself in addition to the underlying asset, is unfathomable for investors. “To increase the depth of the market, options should come into play as soon as possible,” Aran says.

Aran has observed in the past years an inverse relationship with oil-exporting Russia: When Turkey is sold, Russia is bought and when the price of oil falls, the opposite takes place. For him, this is an indication that Turkey is structurally on the path to becoming a “macro play”.

Serkan Aran, Director, Turkish Equity and Derivatives Sales and Trading

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Non resident share (left axis) Resident share (right axis)




Global emerging market investors have been keenly following what’s going on in Turkey, as they have been the most affected by

the Turkish Central Bank’s “unorthodox” policy of implementing an interest rate corridor, changing borrowing costs almost on a daily basis while implementing a proactive policy regarding the amount of cash lenders have to park at the Central Bank as required reserves. Foreign investors held $37.5 billion in Turkish bonds as of end-2011 – a figure that’s risen to $48 billion in mid-July as the markets better understand that the Central Bank’s policy amounts to a significant net tightening.

“In 2011, dedicated emerging market investors remained either underweight or neutral on Turkish bonds,” says Recai Gunesdogdu, the IS Investment managing director for fixed income and structured products. He remembers non-resident investors repeatedly questioned the motives of the Central Bank. “With the net policy tightening, bond investors who were previously concerned on inflation have come back. Their interest in Turkish paper has risen, especially toward the short-end

of the nominal curve and CPI linkers,” Gunesdogdu observes.

As perceptions improve, IS Investment has been trying to spur more interest toward Turkish bonds. “Non-resident investors have increased their holdings of Turkish Treasury as they have observed that the CBRT’s policies proved to be right, inflation did start to come down and the current account deficit has been moderating,” Gunesdogdu says. “We have an incredibly strong banking sector and a public debt-to-GDP ratio of 40%. The current account deficit is being comfortably financed. Investors who are familiar with Turkey’s

no more confusion over monetary policy The Turkish Central Bank’s policy of implementing an interest rate corridor rattled bond investors last year but, as it becomes clear that the policy amounts to a significant tightening, investors are taking a closer look. The sound fundamentals of the Turkish economy, coupled with falling interest rates, create good opportunities for global investors

Recai Gunesdogdu Ph.D. Director, Fixed Income and Structured Products




dynamics see that the country can certainly get the financing it needs. They are also aware of the ‘cushion effect’ that the unregistered economy creates.”

Sound banking, low debt and such a cushion mean that Turkey is “very buyable”, according to the fixed income expert. “Turkey offers long-term real yield ranging between 3-3.5%, while the real yield for CPI linkers is among the highest in the world,” Gunesdogdu says.

Gunesdogdu is not pessimistic regarding Turkey’s sovereign credit rating, which remains below investment grade. “At the end of the day, when global risk appetite changes, ratings agencies will look at our fundamentals and upgrade. Looking at the market’s pricing of risks, Turkey already trades as if it is investment grade,” he says.

“The benchmark interest rate has come down from 9.2% at the beginning of June this year to below 8%, as non-resident investors increased their holdings of Turkish Treasuries from 16% to 22% year to date. We may see some correction as some of the leveraged investors may opt to take profit in the months ahead”, adds Gunesdogdu. “For the pessimistic investors, there’s still better yield in short-term paper as the very short-end of the nominal yield curve is inverted. Plus the CPI linkers remain a favourite instrument for conservative investors.”

Investment funds and warrants seek more attention As the Turkish capital markets mature and investors seek to diversify options, Yasin Demir, the IS Investment assistant manager, is there to help them in the world of warrants, hedge funds and exchange-traded funds. Since their inception in 2005,

ETFs have reached a size of 300 million liras, and Demir says this is not enough. He notes the inadequacy of institutional investors, adding that regulators can do more to support this market.

“The investment fund market remains virtually unchanged for the past decade – except for private pension funds,” Demir says. “Regarding the more popular principal-protected funds, we have reached a size of 2 billion liras. As they enjoyed the distribution channels of banks, these funds were sold easily.” However, in hedge funds, Turkey has not seen enough progress.

But warrants, which were launched in 2010, filled a void in the market, benefiting from the lack of options trading. IS Investment is a big player in this market, which has seen issuances based on the ISE-30 index, USDTRY and gold. “Warrants provide the investor with much-needed leverage, and they receive speculative demand,” Demir explains. “However, when options enter the scene, their attraction will fade. But even then, we will see warrants in maturities and underlying securities that fall outside TurkDex options contracts.” IS Investment predicts that we will see warrants based on global equity indices soon.

Yasin Demir, Director, Domestic Markets



TradeMaster allows investors to tap Turkey’s potentialThe top investor choice in electronic platforms, IS Investment’s TradeMaster has been developing continuously, feeding off the need of investors to trade accurately, securely and rapidly. TradeMaster’s domestic and international versions today allow transactions in the equity, derivatives and forex markets on a wide range of mobile platforms

Arkin Sengonul, Director, IT

A defining feature of IS Investment has been its embrace of technology, understanding well its power

to transform the marketplace. In this respect, the revolutionary TradeMaster platform has been the main tool for investors at home and abroad to tap market opportunities.

“IS Investment was collecting orders from various electronic channels (Internet, ATMs, IVR etc) even before the electronic trading mechanism,” says Arkin Sengonul, the information technology manager at the investment house. “IS Investment has become one of the first institutions to link up. But everything changed radically as intermediaries provided customers with the opportunity to do electronic trading directly.”

IS Investment continued significant investments in this regard and developed TradeMaster in 2006-07 as Turkey’s top and best-known electronic trading medium. The brand has a domestic



version and an international version that provide access to the Istanbul Stock Exchange, TurkDex, many organized markets and exchanges and, most recently, the booming forex market. All versions can be accessed from personal computers and mobile platforms, including iPhones, Android mobile phones and tablet PCs.

With the advance of the DMA technology, TradeMaster has subscribed to key global networks, and today it supports both broker-to-broker and network-to-broker access. The platform has been so

successful that around 30% of foreign equity and derivatives orders are delivered through this channel. The figure was only 2.5% a few years ago.

The soaring use of TradeMaster domestically is typical of the Turkish citizen’s passion for technology: Currently, around 90% of all orders from IS Investment are collected electronically. Thus, Turkey’s top investment house has a strong motive in the wishes of its customers to continuously push the boundaries of the most recent technology.

[email protected]:+ 90212 350 2000

Efsane cam [email protected] T: +90212 350 2554Director | M&A

Basak selcuk [email protected] T: +90212 350 2548Assistant Director | Corporate Finance

serhat Gurleyen CFA [email protected] T: +90212 350 2512Director | Research

serkan Aran [email protected] T: +90212 350 2324Director | Turkish Equity and Derivatives Sales and Trading

Recai Gunesdogdu Ph.D. [email protected] T: +90212 350 2310Director | Fixed Income and Structured Products

Yasin Demir [email protected] T: +90212 350 2714Assistant Director | Domestic Markets

Arkin sengonul [email protected] T: +90212 350 2100Director | IT


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