Competition among brokerage firms to be tighter
Competition among brokerage firms to be tighter
JAKARTA (JP): Competition among brokerage firms will be tighter next year because several major foreign brokerages will enter the Indonesian capital market, said a director of the Jakarta Stock Exchange (JSX), Stanyslaus Say.
Stanyslaus told The Jakarta Post on Friday that four foreign securities companies -- Merrill Lynch from the United States, Hong Kong-based Solomon Brothers, Capital Securities from Taiwan and a Malaysian firm, Rashid Hussain -- will operate here next year.
An analyst from PT Barclay Niaga Securities, Steven Kenny, told the Post that competition was already tight this year as reflected by the many securities companies that suffered losses.
Kenny said one way to boost profit is to increase the number of quality issues that have realistic initial public offerings.
Kenny said that although the Indonesian market, as an emerging market, was seriously hurt by the Mexican financial crisis late last year, it was not the only reason for the drop in share price of some newly listed companies.
"I think the trauma of the Mexican crisis is over now and we will see a lot of foreign institutions returning here next year. But the quality issue remains the key point for market growth," Kenny said.
He also foresees American brokerage firms and institutional investors reducing their participation in Indonesia because there will not be another big deal like Telkom, despite the government's plan to privatize three more state-owned enterprises.
Losses
Mas Ahmad Daniri, another director of the JSX, projected that approximately 70 of the 197 securities firms listed on the JSX lost money this year.
He said that during the first six months, 97 firms reported losses, 84 booked profits, 17 were inactive and one, PT Sun Hung Kai Indonesia, was suspended from the exchange.
Sun Hung Kai's suspension was lifted by the Capital Market Advisory Agency last week.
Daniri said that after the implementation of the Jakarta Automated Trading System on May 22, the number of brokerage firms with a daily trading value of between Rp 500 million (US$216,000) and Rp 1 billion increased from 64 to 87.
Brokerage firms with a daily trading value of above Rp 1 billion increased from 43 to 57.
The highest daily trading value of Rp 28 billion was achieved by 12 brokerage firms.
JSX's daily trading volume rose from 21.6 million shares worth Rp 104 billion before May 22 to 42 million shares valued at Rp 130.4 billion after the exchange became automated.
The trend, Stanyslaus said, showed that the automated system helped securities companies better their performance. Increases, however, could only happen if the companies are backed up by a good research department and a strong capital base, he stressed.
He pointed out that almost 70 percent of the total transactions were executed by the 20 most active brokerage firms, all of which are supported by capital and good research departments.
PT Makindo, a domestic company, stayed at the top of the 20 most active brokerages in May, June, July, October and November.
The most active brokerages included HG Asia Indonesia, Jardine Fleming Nusantara, Barclays Niaga Securities, WI Carr Indonesia, Credit Lyonnais Capital and Wardley James Chapel Indonesia.
The top 20 brokerages accounted for 63 percent of total transaction value on the JSX in November. (08)