Morgan Stanley close to becoming IDX member

JAKARTA. The Indonesia Stock Exchange (IDX) has in principle approved the request of a local unit of US major investment bank Morgan Stanley to become a member of the exchange, the bourse’s executive said.

The IDX director for supervision and compliance of bourse members, Uriep Budhi Prasetyo, said in Jakarta on Tuesday that the exchange had issued a confirmation letter approving the request of PT Morgan Stanley Asia Indonesia to buy a seat in the exchange.

“The confirmation letter proves it is eligible to purchase a seat in the bourse,” Uriep said.

Morgan Stanley is believed to have plans to purchase the seat of PT Tiga Pilar Sekuritas, which resigned from the market.

If Morgan Stanley does not purchase Tiga Pilar’s seat, the company will have a chance to grab a seat during a planned auction of five vacant bourse member seats scheduled for this June.

Uriep said that the book value of a bourse member seat reached about Rp 12 billion.

After Morgan Stanley gets a seat, the IDX will issue an approval letter of bourse member (SPAB), which will enable the company to begin operations of its stock brokerage business, according to Uriep.

“Hopefully, Morgan Stanley will be able to become a bourse member before the month’s end,” Uriep said.

He also said that several foreign investors asked the IDX’s authority about the process of becoming a bourse member. “However, none is as serious as Morgan Stanley,” Uriep said.

At present, the IDX has 125 seats allocated for its members.

Five of the seats are currently vacant and will be auctioned after PT Patalion Waters Securindo, PT United Asia, PT Republic Securities, PT Antaboga Delta Sekuritas and PT Eurocapital Peregrine Securities quit the exchange.

According to Uriep, the bourse’s 114 current members are actively trading in the exchange. Meanwhile, others have suffered suspensions for various reasons, including failures to meet minimum net adjusted working capital requirements.

Uriep said that 110 of the total active bourse members have submitted 2011 financial reports.

“Sixty-nine bourse members reported net profits while the remaining 41 booked net losses,” he said, declining to reveal the amount of profits and losses.

The figures were a setback compared to 2010, when 88 bourse members enjoyed net profits and 25 suffered net losses.

Uriep said that drops and fluctuations in the Jakarta Composite Index (JCI) last year might have contributed to bourse members’ performance.

Moreover, he said, new regulations concerning net adjusted working capital (MKBD) might have contributed to the decreasing performance of the bourse members. According to the Capital Market and Financial Institution Supervisory Agency (Bapepam LK), a securities company operating as an underwriter or brokerage, which also administers customers’ securities accounts, must have a minimum of Rp 25 billion in MKBD.

“Securities companies have started to change their portfolio compositions in a response to the MKBD. They might have sold part of their portfolio, causing declines in net profits,” he said.

Uriep expected that bourse members would report stronger performances this year because they have adjusted to the new MKBD regulations, which went into effect in February. Moreover, he said, new companies floated shares on the bourse and increased the number of investors, which would also help bourse members to boost their performance. (Raras Cahyafitri, The Jakarta Post)