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| Participants of K-Finance Week in Indonesia 2023 celebrate the event in Jakarta, May 11. A group of Korea's top-ranking financial figures ― including Financial Supervisory Service Governor Lee Bok-hyun, left, KB Insurance CEO Kim Ki-hwan, third from left, Hana Financial Group Chairman Ham Young-joo, fifth from left, and Mirae Asset Securities Chairman Choi Hyun-man, sixth from left ― joined the event. Courtesy of KB Financial Group |
By Lee Min-hyung
Indonesia is emerging as a hub for major securities firms' overseas business due to the country's economic and demographic potential.
Brokerage houses here have long recognized the need to diversify their sales channels overseas amid toughening competition in the domestic market. Their revenue structures are also vulnerable to macroeconomic circumstances, as was shown by their steep earnings fall in 2022 amid then-freezing investor sentiment on the back of steep rate hikes.
Major brokerage houses have so far focused on expanding their presence mostly in Asian markets, as they have a slimmer chance of competing against their American and European counterparts.
Indonesia's population is estimated at around 272 million. Korean financial firms eye the country as their strategic base for the region, as young people between the age of 15 and 34 account for around 35 percent of the total population. This is far higher than some 20 percent of Koreans.
Shinhan Sekuritas Indonesia, the local branch of Shinhan Securities, is widening its footing in the country rapidly after recently serving as a lead manager for the initial public offering (IPO) of PT Informasi Teknologi Indonesia (JATI) ― an artificial intelligence-powered app developer ― in the country's stock exchange. The Shinhan subsidiary has so far succeeded in the listing of four local companies there.
Korea Investment & Securities is also identifying Indonesia as its next major revenue channel. The company signed a memorandum of understanding with the Indonesia Stock Exchange on the introduction of advanced financial products. The partnership was clinched on the sidelines of the K-Finance Week in Indonesia 2023 event.
Financial authorities are also ramping up efforts to build more amicable relations with their Indonesian counterparts. Last week, Korea's Financial Supervisory Service (FSS) Governor Lee Bok-hyun also left Korea for meetings in three Southeast Asian countries ― Thailand, Singapore and Indonesia.
His primary focus was on Indonesia, as a growing number of Korean securities and financial companies hope to expand their presence there. Lee met with his counterpart and a group of officials from the country's financial sector, with a view to requesting support for more Korean financial firms to expand their footing there.
A total of six securities firms here including Mirae Asset Securities, Korea Investment & Securities and Shinhan Securities have tapped into Indonesia. But they have struggled to create outstanding earnings performance there despite the country's massive growth potential.
According to data from the brokerage houses, Mirae Asset Securities was one of the two companies to achieve a surplus in Indonesia in 2022. But its net profit ended up declining by 77 percent from the previous year. KB Securities ― which jumped into the market after acquiring a local brokerage house last year ― also generated a profit, while most others, including NH Investment & Securities and Kiwoom Securities, reported deficits there during the same period.
"Financial authorities need to introduce a set of deregulatory measures when financial firms expand into the overseas market, as part of efforts to support their global drive," an official from a major securities firm said.
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