Securities firms consolidate their operations
JAKARTA (JP): A number of local securities companies are engaged in massive cost-cutting programs to cope with the economic crisis -- laying off key personnel and consolidating business units.
Deutsche Morgan Grenfell, for example, announced early last week that its Indonesian equities operations would be consolidated into its Hong Kong and Singapore hubs.
The firm's head of Equities Asia and Australia, Mark Cullen, said this would enable the company to integrate its regional operations more effectively into its global equities platform.
"It will concentrate our salesforce where the majority of our institutional clients are located and significantly reduce operating cost," he said.
Industry sources said many securities companies were shedding highly paid, key personnel due to spiraling costs resulting from a plunge in the rupiah's value against the U.S. dollar.
"Foreign executives who are paid in U.S. dollars are the main targets of lay-off measures," the source said.
Most securities houses earnings are in rupiah as they generate their earnings through transaction fees in the Jakarta Stock Exchange.
Laying off expensive staff is not the only cost cutting measure being taken.
Many brokerage houses are also leaving expensive offices.
Some of the brokerage houses currently occupying the expensive Jakarta Stock Exchange building will soon move to cheaper buildings.
"Most rental fees are in dollars and the sharp fall of the rupiah against the greenback has caused an over 300 percent increase in rental costs," a source said.
"The securities business (situation) is getting worse not merely due to the rupiah plunge. A persistent drop in share prices has scared away investors," the source added.
Indonesia is the worst-hit country in the region which is being battered by monetary crisis.
The rupiah has falling about 80 percent against the dollar since July last year and stock prices have fallen 28 percent over the same period.
The rupiah closed the week at 9,400 Friday against a regular 2,450 in early July last year. The Jakarta Stock Exchange composite index closed the week at 535.42 points against 740.83 points on July 8 last year.
PT DBS Securities Indonesia, 85 percent owned by DBS Bank of Singapore and 15 percent by the Gajah Tunggal Group of Indonesia, is also taking cost-cutting measures.
A reliable source in the company told The Jakarta Post late last week that about seven top foreign and local executives, mostly paid in U.S. dollars, would be laid off this week or next week.
The source said the executives were working in the firm's research, sales and marketing departments.
DBS Securities Indonesia employs 50 people in low level to top level management positions.
The source said lower ranking management staff would be maintained as the company would continue its operations in Indonesia.
Previous reports said PT Sasson Securities Indonesia, PT Credit Lyonnais Capital Indonesia and PT Lippo Securities had made major lay-offs due to financial problems.
Early last November, Lippo Securities, one of the first securities companies listed on the Jakarta Stock Exchange, fired seven top executives as part of its efficiency program. (aly)