Indonesia is being eyed as an upcoming hot spot for broking in Asia, with the regulator expected to open up the market to third-party clearing in the near future as the asset management sector is set to expand, according to BNP Paribas.
Broking activity in Indonesia is centred on “mainstream equities for mainstream institutional clients”, says Alan Cameron, head of client development for broker-dealers and investment banks, BNP Paribas Securities Services. “More of them are talking about wealth management nowadays, compared to a few years ago.”
Indonesian regulators are expected to open the door to third-party clearing for securities in 2012, as part of a greater overall plan to improve the market’s trade cycle, says Barnaby Nelson, BNP Paribas Securities Services’ head of client development in Asia for bank, broker-dealers and corporate issuers.
The move will likely come ahead of an anticipated ratings upgrade in Indonesia, which would drive up domestic trading volume. Indonesia’s sovereign debt ratings fall under the ‘sub-investment grade’ category, but an upgrade is expected in the next 12 to 18 months because of continued improvements in economic fundamentals, says Nelson. “There’s writing on the wall for it to be upgraded to investment grade.”
The market’s emerging importance for the broking industry in Asia is underlined by the fact that Goldman Sachs has reportedly been in talks to buy small Indonesian brokerage Tiga Pilar Sekuritas, while Morgan Stanley and South Korea’s Hyundai Securities are said to be seeking brokerage acquisition targets in the country.
Entering the market through purchases of existing brokers would give the two US banks – which do not have brokerage licences in the country – each a seat on the Indonesian stock exchange.
Another factor that is expected to boost domestic brokerage activity is the expectation that Indonesia will soon start issuing new fund management licences, having halted the approval process at the onset of the financial crisis in September 2008.
South Korea’s Mirae Asset Global Investments is reportedly considering the acquisition of an Indonesian asset management firm, according to recent comments by its chief executive, Koo Jae Sang. He did not name any target brokerages or a timeline.
“Indonesia is right in the firing line at the moment,” says Nelson. He notes that the country is a promising market for growth, which is backed by strong domestic consumption. “In Asia, it’s one of the few markets that is self-sustaining.”