Morgan Stanley’s IDX brokerage seat within sight

PT Morgan Stanley Asia Indonesia, the local flag of one of the top US investment banks, has come close to securing a brokerage seat at the Indonesia Stock Exchange (IDX) in order to tap the growing stock market in Southeast Asia’s top economy.

Capital market regulator Bapepam-LK is currently processing the activation of Morgan Stanley Indonesia’s brokerage license, which might be concluded as soon as within the month, Bapepam bureau chief for transactions and securities firms Yunita Linda Sari said Friday.

Morgan Stanley Indonesia already has had a principle license underwriting operations here since 2008, which does not include a brokerage license.

“[Morgan Stanley Indonesia] has submitted an application for us to re-activate its brokerage activities,” Yunita told a press briefing at her office. “There will be several processes to be undergone — files, facilities follow-up, site visit and on site examination. We could do the onsite [visit] next week.”

Morgan Stanley Indonesia will buy a brokering seat from local securities firm PT Tiga Pilar Sekuritas, one of the 120 bourse members, said Uriep Budhi Prasetyo, IDX’s director of transaction supervision and compliance.

“Tiga Pilar has asked for its brokerage license to be withdrawn in light of [a deal] with Morgan Stanley,” he told reporters last week. “[Morgan Stanley Indonesia] must have a brokerage license to activate its [stock exchange seat].”

IDX president director Ito Warsito told The Jakarta Post on Friday that Tiga Pilar’s brokerage license had been withdrawn, paving the way for Morgan Stanley Indonesia to take over.

“The requirements and process to buy a stock exchange seat are simple, but the most important thing is for the buyer to secure Bapepam’s approval,” he said over the phone.

Secondly, the buyer needs to be prepared to operate as a stock exchange member by checking its trading system, assessing risk management and so on.”

Ito said value of the seat depended on the deal between both companies. Bapepam requires capital of at least Rp 25 billion (US$2.78 million) to set up a brokerage unit.

Morgan Stanley Indonesia president director Andy Purwohardono did not respond to the Post’s inquiries to clarify the news and Tiga Pilar executives were not available for comment.

The Indonesian stock market has seen a steady increase in trading frequency and average daily value — respectively at 30.3 and 23.5 percent from the end of 2009 through 2011 to 113,454 times and Rp 5 trillion, benefitting brokers who earn fees for each transaction made buying and selling stocks.

Market capitalization grew 75.2 percent to Rp 3,537.3 trillion during the two-year period as the benchmark Jakarta Composite Index (JCI) surged 50.1 percent to almost 3,822 at the close of last year.

Both foreign and domestic investors have been pumping funds into Indonesia’s stock market due to the country’s resilience, despite external shocks following the 2008 crisis, given that domestic consumption is drives the country’s economy.

That translated into higher corporate earnings growth than other countries in the world, excluding India, said Michael Tjoajadi, president director of the nation’s biggest fund manager, PT Schroder Investment Management Indonesia.

While they might be a new competitor for existing members, Danareksa Sekuritas stock market analyst Chandra Pasaribu said Morgan Stanley Indonesia’s direct presence in the stock exchange might not have great impact on trading.

“Morgan Stanley has already had a presence in Indonesia with its local activities, so the seat will not change anything, it will just change the indirect presence into direct,” Chandra said.