Economic Indicators In The Capital Market Of Turkey Economics Essay

When examined from a historical position, it is possible to detect that the formation of exchanges extended to the early old ages of the Ottoman Empire and continued through the twenty-first century. The issue of authorities bonds in response to factors such as Ottoman attempts at opening to the West, the being of economic jobs, and the funding of military struggles and so on, all made the formation of a capital market necessary.

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Furthermore, the thought of establishing similar fiscal establishments to those bing in European states was besides an of import factor at drama in Ottoman considerations. The intent of this paper is to analyze how the ISE has reached its current phase of development, the jobs it has encountered and the troubles through which it has passed.

Stock markets have two chief maps. One of these involves speed uping economic development by supplying long term and low cost financess for enterprisers and the other is to assist the distribution of national income to the populace in a more merely manner. The requirement for the stock markets to execute these maps in the best possible manner is the constitution and operation of the free market order with all its establishments and mechanisms. The phase which comes following is puting in topographic point the procedure for supplying the stock markets with a healthy and fruitful construction 38. The inclination towards a lessening in the stock portion of ISE, which started with the Iraq war continued during the first half of the twelvemonth 2003. Both monetary values and operation volume increased in the stock portion market due to positive developments in the economic system and the arrested development in involvement rates in the 2nd half of the twelvemonth. While the norm of the index in December which increased fast was at the degree of 15.045 points, the norm of operation volume increased to the degree of 1.138 trillion TL 39.

At the ISE, two primary public offerings and 4 secondary public offerings were executed in the twelvemonth 2003. Due to the influence of negative events the fiscal markets were reduced in size in 2001 and foreign investors abstained from doing investings. Under this abstinence the operation volume of the foreign investors increased merely to a degree of 6 % in ISE during 2002. This ratio increased to the 34,6 % degree under the influence of positive developments in 2003 as for the old twelvemonth. While buying operations of 6,3 billion $ by foreign Bankss and mediators or single investors in 2001, this figure reached 6,4 billion $ and 9,2 billion $ severally in 2002 and 2003. In the same manner, buying operations which totaled 5,8 billion Dollars in 2001, reached 6,4 billion $ in 2002 and 8,2 billion $ in 2003. The foreign investors which were in the place of net buyer in 2001 and net provider in 2002 became net buyer in 2003 once more. As per the closing monetary values of the terminal of the twelvemonth, the industrial index increased at a degree of 47, 9 % and the fiscal index increased to the degree of 15,5 % when compared to the closing monetary values of the old twelvemonth 40.

The chart above contains informations in US Dollars as of 1996 related to the Istanbul Stock Exchange ( ISE ) index and dealing volume.

Trust to the economic plan supported by IMF, the dealing volume at the ISE Stock Market doubled its Ascension and reached to 181 billion $ in regard to old old ages. But, because of the unexpected negative effects of the November 2001 and February 2001 crisis, the dealing volume decreased by % 56 to 79 billion $ in 2001. This recession continued in 2002 and the dealing volume decreased to 70 billion $ . The twelvemonth 2003 began with tenseness over the Iraq war and saw a inclination towards a autumn in the stock exchange that continued until the 2nd half of the twelvemonth. The dealing volume increased by % 42 and reached to 99,4 billion $ due to the stoping of the war at the 2nd half of the twelvemonth in March, the positive betterments in the economic system and the recede on the involvement rates. ISE index increased to % 111 in Dollar footing at the terminal of the twelvemonth 2003.

One of the basic economic indexs is the ratio of the market value of traded companies /GDP.

The entire market value of companies being traded on the ISE increased under the influence of the public and rises in value. However, the entire market value has displayed a lessening, due to the fiscal crisis in 2000 and 2001, the lessening in the indices of ISE as a consequence of the crisis, a limited figure of public offerings and due to the stocks, taken out from the ISE market. On the other manus, in the old ages of 2003 to 2010 the proportion of the market value compared to the Gross Domestic Product once more entered an upward tendency.

The chart below shows companies traded on the stock exchange, segmented harmonizing to old ages.

The figure of companies quoted on the stock exchange displayed a rapid addition until 2000.

However, after multiple public offerings in 2000, it started to regress. Among 35 public offerings in 2000, 1 company has been started to be quoted, while 6 companies have been taken out of the stock exchange, so that the figure of companies traded on the stock exchange increased by 30 to be summed up to 315 companies. In 2001, nevertheless 1 company was publically offered and another 6 companies have been taken out of quoted on, so that the entire figure of companies traded on the stock exchange decreased to 310. In 2002, the figure of companies decreased to 288. In 2002, 4 companies were publically offered. On the other manus, due to the fact that 13 companies started to be traded on regional markets and 14 companies were taken out of quoted on, the entire figure of publically traded companies decreased by 22. In 2003 nevertheless, 2 public offerings were realized, the stocks of another 2 companies started to be quoted once more. However, as 7 companies have been removed from citation, the entire figure of companies traded has decreased to 285 41.

One of the of import development is that a derived functions market was established in 2005. This is the market for derivative securities, including hereafters contracts, frontward contracts, options and barters. Derived functions are securities whose values of other more basic variables. These include the value of linked assets, for illustration ordinary portions, bonds, currencies, and trade goods. Derivative securities are being used in order to debar or cut down fiscal hazard 42. In general, 2005 was a twelvemonth of stable macro economical balances. The rising prices rate decreased to the lowest degree of recent old ages, foreign exchange rates moved horizontally, of import advancement was achieved in denationalization and the Gross National Product continued the consistent addition of the last few old ages. By contrast, the foreign trade shortage and the current history shortage have increased. Positive developments in macroeconomic indexs have besides affected the stock exchange. Turkey ‘s ability to profit from the planetary liquidness turn toing emerging states has besides contributed to the 2005 public presentation of the stock exchange.

The positive ambiance, which started in the markets in 2003 progressively continued in 2004 and 2005. The tendency of lessening in the rising prices and involvement rate has affected positively the stock exchange so that the ISE-National 100 index and minutess volume increased quickly within the twelvemonth. This state of affairs can besides be seen in the graph below.

Graphic 2: ISO-100 Index and dealing volume. Beginning: Turkish Capital Market 2005, Publication of the Association of

Capital Market Intermediary Institutions of Turkey, p.45.

As shown in the graph, the index entered 2005 on an upward tendency. This tendency which lasted for the first few months, began to expose a horizontal motion in April and May. From June onwards, it is possible to see that the index had increased once more. The velocity of this addition continued to turn in the undermentioned months and 2005 closed with a high index making the 39.778 degree. Positive outlooks environing accession dialogues between Turkey and the European Community accelerated the upward tendency of the index in September.

When it became evident that full accession dialogues were to get down in October, increases climbed to record degrees. The ISE-National 100 index has shown additions of 59 % in YTL footings and 61 % in USD footings in 2005 43.

The graph below shows the market values per old ages as of 1986.

Graphic 3: Market Value. Beginning: Turkish Capital Market 2005, Publication of the Association of Capital Market

Intermediary Institutions of Turkey, p.47.

When analyzing the graph, it is possible to see that the market value reached the highest degree in the history of the stock exchange in 2005. While the entire market value was 98 billion Dollars in 2004, it increased by 65 % in 2005 amounting to 163 billion Dollars. This addition is besides due to the part of 11 public offerings realized in 2005.

The graph below shows mean day-to-day stock dealing volume as of old ages, 1986-2005.

Graphic 4: Dayl Stock Transaction Volume.. Source: Turkish Capital Market 2005, Publication of the Association of Capital Market Intermediary Institutions of Turkey, p.47.

It is possible to spot that stock dealing volume exhibited a tendency of slow but stable addition during the old ages 1990-1999. In 2002 nevertheless, the dealing volume doubled with a sudden addition in comparing to the old twelvemonth and subsequently declined with a crisp lessening once more to the degrees of 1990. This lessening was, to a major extent, caused by the fiscal crisis experienced in November 2000. In 2000, the day-to-day mean dealing volume of 740 million Dollars decreased to degrees of 250 – 300 million Dollars in 2001 and 2002. However, in 2003, the day-to-day mean dealing volume started to increase due to positive developments in the markets. In 2004, it reached 600 million Dollars. The addition continued in 2005 and in comparing to twelvemonth 2004, the day-to-day mean dealing volume increased by 34 % in Dollars footings and reached 794 million Dollars. Therefore, the degree of 740 million Dollars achieved was exceeded in 2000 44.

The faster than expected recovery in economic activity, the Medium-Term Program indicating that the fiscal subject will go on, the stableness in the fiscal system, the positive evaluations of recognition evaluation bureaus and the hazard premium indexs following a class even below pre-crisis degrees, all suggest a positive mentality for the Turkish economic system. As capital influxs accelerate along with these developments and the addition in the planetary hazard appetency, market involvement rates fall, plus monetary values escalate and the Turkish lira strengthens. In bend, these developments, trigger ingestion and investing demand, increasing loans used both by families and houses, and contribute to growing of the economic system on the dorsum of domestic demand.

The addition in the planetary hazard appetency, the high growing rate of the Turkish economic system, subject in public finance, a sound fiscal system and comparatively high involvement rates lead to capital influxs, which are chiefly composed of Bankss & A ; acirc ; ˆ™ adoptions from abroad and portfolio investings. Net capital influxs, which reached 8.3 per centum of the GDP during the 3rd one-fourth of 2008, fell to 1.3 per centum of GDP in the 3rd one-fourth of 2009 on the dorsum of the planetary crisis. This development was chiefly attributable to the fact that the Bankss and other sectors were net external debt remunerators at that clip. With the issue from the planetary crisis, capital influxs gained gait and reached 3.4 per centum of the GDP by the 2nd one-fourth of 2010 ( Chart II.1 ) .

The Turkish economic system, have experienced an uninterrupted economic growing for 27 back-to-back quarters prior to the planetary fiscal crisis, started to shrivel in the last one-fourth of 2008 and contracted for four quarters. Thankss to the financial stimulation bundles and pecuniary policy easing steps, the Gross Domestic Product started to lift once more in the 4th one-fourth of 2009. On the dorsum of the strong domestic demand, GDP increased by 11.8 % , 10.2 % and 5.5 % severally, during the first three quarters of 2010.

Beginning: Turkish Statistical Institute ( TurkStat )

Looking into GDP in production footings, it is observed that all sectors, except fiscal services and agribusiness, made negative parts to growing in 2009. The economic contraction started in the last one-fourth of 2008 was reversed in the last one-fourth of 2009. The rush in the industry and services sectors led to 6 % growing in GDP in the 4th one-fourth of 2009.

The rapid growing tendency, peculiarly in the industrial sector and domestic demand, has continued in 2010. The robust economic public presentation in the four consecutive quarters up to the terminal of September 2010 has made Turkey the fastest retrieving economic system among the European and the OECD states, and besides one of the fastest turning economic systems in the universe.

Economic recovery in the first three quarters of 2010, with 8.9 % GDP growing, has been fuelled by the industry and services sectors, which made a 3.6 % and 3.5 % part to the overall growing severally. Financial intermediation services displayed a wholly different tendency from that of general services sector. While the services sector continuously contracted get downing from the eruption of the planetary fiscal convulsion till the last one-fourth of 2009, fiscal intermediation services grew continuously during the crisis period on the contrary to its foreign opposite numbers, thanks to old prudent reforms made in the fiscal sector. In 2010, all sectors, excepting agribusiness, grew and made a positive part to the GDP growing.

Rate of Production Items & A ; acirc ; ˆ™ Contribution to GDP

Beginning: TurkStat and Investment Support and Promotion Agency of Turkey

( ISPAT )

When the composing of growing is analyzed in footings of outgo, it is observed that the autumn in private investing and ingestion outgos played an of import function in the economic contraction observed throughout 2009. The private sector responded to the crisis by cut downing investing expenditures significantly due to the uncertainness in economic conjuncture, the diminution in foreign direct investings ( FDI ) and the trouble in happening long-run funding resources.

Consumption Items & A ; acirc ; ˆ™ Contribution to GDP

Beginning: TurkStat and ISPAT

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