Portfolio Investments

Turkey has one of the most liberal foreign exchange regimes in the world, with a fully convertible currency as well as a policy that allows foreign institutional and individual investments in securities listed on the Istanbul Stock Exchange, (ISE) since 1989. There are no restrictions on foreign portfolio investors trading in the Turkish securities markets. Decree No. 32 passed in August 1989, removes all restrictions on overseas institutional and individual investment in securities listed on the Istanbul Stock Exchange. Hence, the Turkish stock and bond markets are open to foreign investors, without any restrictions on the repatriation of capital and profits. Decree No. 32 also allows Turkish citizens to buy foreign securities.

Real persons and legal entities residing abroad (including investment trusts and investment funds abroad) can freely purchase and sell all sorts of securities and other capital market instruments.

A foreign institutional or individual investor should use a Turkish intermediary institution for securities activities. (Such as, buying and selling securities, repo, reverse repo, portfolio management, investment consultancy, underwriting, margin trading, securities lending etc.)

Also a foreign investor can hedge currency risk by trading at ISE Derivative Market.

Foreign investors' share of domestic debt has more than doubled on an annual basis, from 4% in May 2004 to 9% in May 2005. Coupled with a strong local appetite for Turkish Lira denominated assets, the ample foreign flow triggered a hasty rally in the local bond market.

Foreign investors' increased participation in the ISE also confirms the increasing appetite for the Turkish market. From an average 54% in 2004, the share of securities under custody in the ISE that are held by foreign institutions has increased to 64% in May 2005, mainly through private placements.

The Istanbul Stock Exchange compound index increased by almost 48% in US$ terms in 2004 and IMKB became the seventh best-performing market among those of the 25 emerging-market countries.

In 2005, the Istanbul Stock Exchange was one of the fastest growing stock markets in the world with the index closing the year at 39,770.70 against 24,971.68 at end-2004, a rise of 59.3 per cent.

For further information:

Istanbul Stock Exchange (http://www.ise.org/)

Turkish Derivatives Exchange (http://www.turkdex.org.tr/)