February 1, 2012

Morgan Stanley Buys Indonesian Brokerage Seat

Beats out Goldman in deal to expand on exchange

James Gorman, Morgan Stanley CEO, had said last year the firm wanted to move into Indonesia. (Photo: AP) James Gorman, Morgan Stanley CEO, had said last year the firm wanted to move into Indonesia. (Photo: AP)

For a while, Goldman Sachs was interested in increasing its presence in Indonesia. But now it seems that, as Goldman's interest waned, Morgan Stanley's grew till it succeeded in purchasing a seat on the Indonesian stock exchange, where it will be able to trade securities and provide research once the deal has been completed.

Reuters reported Wednesday that although Goldman had originally pursued the seat, owned by local securities firm PT Tiga Pilar Sekuritas–seats on the Indonesian exchange are limited to 120, so companies wishing to trade must purchase an existing seat–its enthusiasm had been judged insufficient, according to a Jakarta-based source. Tiga Pilar's owners then turned to Morgan Stanley, whose enthusiasm was apparently sufficient.

On Wednesday, trading by Tiga Pilar was suspended pending the execution of the deal, which will give Morgan Stanley entrée to the biggest economy in Southeast Asia. Regulatory approval has not yet been granted.

According to the report, Morgan Stanley received an underwriting license in 2008, but wants to expand its presence by means of a full broker license. Goldman has neither in Indonesia. James Gorman, Morgan CEO, said in a November statement that the firm intended to establish an onshore presence in Indonesia in 2012, as well as a new equity brokerage operation in midyear, since it views the country as a strategic priority.

Unidentified sources cited in the report said that the company has hired James Brewis, former head of sales for the Indonesia unit of UBS, as head of its Indonesian equities. It also intends to expand, hiring additional salesmen, traders and research staff in the months to come.

Harry Su, head of research at Jakarta-based brokerage PT Bahana Securities, was quoted saying, "The level of competition is obviously going to be heightened, whether it is about underwriting and stock deals or human resources. I think brokerage firms will have a challenging time hiring across the board as they will aim to take many people from local firms, while there is a scarce supply of good brokerage professionals here."

Perhaps Morgan intends to challenge Citigroup, which purchased Indonesian brokerage Republik in 2010 and then supplemented staff with additional bankers and analysts. Citigroup also hired Ferry Wong from Macquarie to be its head of research. Since then, it has risen to second among global banks, behind Deutsche Bank, for underwriting equity deals; it led debt underwriting in 2011.

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