Istanbul Opens New Bourse as Erdogan Seeks to Build Finance Hub

Prime Minister Recep Tayyip Erdogan took a step toward making Turkey’s financial capital a regional hub, relegating the Istanbul Stock Exchange to history as he rang the opening bell at the new Borsa Istanbul.

The ceremony marked the first trading day at the bourse, which incorporates the 28-year-old Istanbul Stock Exchange with the Istanbul Gold Exchange and the Izmir-based derivatives exchange.

“In the U.S., the political center is Washington, D.C., while New York is the center of finance,” Erdogan said after ringing the bell with officials including Deputy Prime Minister Ali Babacan and Borsa Istanbul Chairman Ibrahim Turhan. “In Turkey, Ankara is the political center and Istanbul deserves to be the financial center.”

The exchange plans to encompass commodities and electricity trading in the near future, as a part of Erdogan’s plan to make Istanbul a regional financial center and Turkey’s economy one of the world’s 10 biggest by 2023.

“This will become an exchange in which capital market products of Turkey and the region will be traded,” Huseyin Erkan, chief executive of the World Federation of Exchanges and a former head of the Istanbul exchange, said in an interview at the ceremony. “Foreign funds that pass through Turkey through this bourse will leave a beneficial residue behind.”

Borsa IPO

Turkish equities were the second best performers worldwide last year, with the benchmark ISE National 100 Index (XU100) surging more than 60 percent in dollar terms. It has added almost 5 percent this year.

Still, the value of listed companies is lower than some competitors, with many Turkish companies preferring to stay private. The Istanbul Stock Exchange’s market capitalization was $270 billion as of January, according to the Paris-based World Federation of Exchanges. In South Africa, an economy about half the size of Turkey’s, the equivalent figure was $895.5 billion.

Ten companies started trading in Istanbul last year, according to data compiled by Bloomberg. The biggest IPO was technology retailer Teknosa Ic & Dis Ticaret AS (TKNSA), at 98 million liras ($54 million).

It may take a few more years for Borsa Istanbul to hold its own initial public offering, and it may eventually consider merging with other exchanges, Erkan said. Turkey’s new capital markets law, which came into effect on Dec. 30, has turned the bourse into a joint stock company with capital of 423.2 million liras ($235 million).

‘Daily Game’

At the ceremony, Turkish officials pledged to encourage more firms to go public.

“Our companies still do business through loans as they carry more debt to their balance sheets,” deputy premier Babacan said. “We have to spread the culture of partnership and develop capital markets in the sake of healthy balance sheets.”

The full integration of the Turkish Derivatives Exchange into Borsa Istanbul will be completed within a month, Babacan said.

Mehmet Buyukeksi, chairman of the Turkish Exporters’ Assembly, said not all Turkish businesses have understood the function and potential of the bourse.

“It has been perceived as something similar to a daily game,” he said in an interview. “This will hopefully change.”

Buyukeksi said his association is planning joint training sessions with Borsa Istanbul for Turkey’s top 1,000 exporters, encouraging them to hold public offerings.

To contact the reporter on this story: Taylan Bilgic in Istanbul at tbilgic2@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

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