A roaring stock market and easy access to credit have helped raise the net worth of the country’s super-rich to new highs. This trend will likely continue as the creation of wealth in Indonesia now takes on a new dimension.
A year can make a huge difference in the life of a corporate owner, especially when markets are booming and the economy is growing. Opportunities abound and deal flows pick up as business owners seek ways to expand and unlock value.
Over the past 12 months, a perfect confluence of factors has produced conditions for wealth creation that may be unprecedented. The Indonesian rupiah has strengthened by nearly 10% while the stock market has risen by more than 60% and commodity prices have remained strong.
The Indonesian stock market has been one of the best performers in the region, boosted by strong commodity prices and inflowing foreign funds. The Indonesian Stock Exchange Composite Index (ICI) rose from 1,751 on May 15, 2009, to 2,800 this year. It reached a high of 2,971 at the end of April.
Given that much of Indonesia’s wealth is locked in its natural resources, it has been an exciting time for business owners. As GlobeAsia’s 150 Richest Indonesians list proves, wealth is being created at a rapid pace.
The total net worth of the 150 rose to $61.5 billion this year, a 22% increase over 2009. Wealth was created both from the rising stock market as well as the fast-expanding economy.
“The fundamentals of Indonesia have never looked so good,” notes Rajiv Louis, executive director of investment banking at UBS Indonesia. “There was exuberance for Indonesia in the 1990s but at that time the fundamentals were very different.”
Today’s Indonesia enjoys macro-economic and political stability, strong micro-level corporate growth and healthy balance sheets. Plus, of course, there is a lot of liquidity in the banking sector, which escaped relatively unscathed from the 2008 global financial crisis.
“There is sufficient liquidity around and people are getting good access to money,” says Rajiv. “Interest rates are also no longer prohibitive to prevent people from doing deals.”
As a result, business owners are positioning themselves to take advantage of the conditions. Corporate players such as Aburizal Bakrie and Chairul Tanjung are expanding their businesses at a rapid rate by either borrowing or listing their companies to raise cash as they seek to enlarge their presence in the domestic market.
Bakrie, for example, is looking to raise some $600 million this year by listing Bumi Minerals while Chairul, who owns the Para Group, recently acquired a 40% stake in French retailer Carrefour for between $300 million and $400 million. He funded his acquisition by borrowing from four international heavyweight banks such as Credit Suisse, Citibank, JP Morgan and ING.
Access to funds is key Chairul is only of the many tycoons who has borrowed heavily to grow his business. In fact, say market analysts and investment banks, the ability to access cheap funds has become a major competitive advantage for Indonesian business owners.
“Access to funding is quite well spread among the top 40 business owners in the country,” says Lin Che Wei, founder of Independent Research Indonesia. “Its an equal playing field but some people are able to borrow more cheaply than others and that makes a big difference.”
He adds that most deals with good rates of return have been snapped up so, looking ahead, an ability to borrow cheaply will determine how profitable an acquisition will be. Business owners who have a good reputation in the market can therefore command much more competitive borrowing rates compared with people who have defaulted on loans in the past.
Apart from just borrowing cheaply, the creation of complex financing structures is also becoming increasingly important. As Indonesia’s capital markets expand, business owners must also become more financially savvy and those who can grasp the complexities will get a head start.
“Capitals markets are now critical to wealth creation and more businesspeople are realizing this,” notes a senior banker. “Today, having a solid business is no longer enough, as you have to know how to unlock the value of your asset.”
He estimates that new listing this year will total $5 billion, raising the market capitalization of the stock market to around $260 billion. “If the index continues to rise, we might see values rising too and wealth growing in tandem.”
Competition for the country’s wealth will only grow keener in the coming years as more business players fight for control over natural resources. Most of the wealth created over the past few years has been in financial services, natural resources and consumer retail. This trend is expected to continue as it plays on Indonesia’s comparative strengths.
“This will be a good year for wealth creation,” says Rajiv from UBS. “But it is too early to tell if it will be stellar.
Here, top 15 of richest Indonesians list from 150 richest Indonesians :
1. Budi Hartono (Djarum) 4,8 billion dollar AS 2. Eka Tjipta Wijaya (Sinar Mas) 4 billion dollar AS 3. Anthony Salim (Salim) 3,6 billion dollar AS 4. Aburizal Bakrie (Bakrie) 3 billion dollar AS 5. Martua Sitorus (Wilmar) 2,5 billion dollar AS 6. Putra Sampoerna (Sampoerna Capital) 2,4 billion dollar AS 7. Sukanto Tanato (Raja Garuda Mas) 1,8 billion dollar AS 8. Dato Low Tuck Kwong (Bayan) 1,4 billion dollar AS 9. Peter Sondakh (Rajawali) 1,3 billion dollar AS 10. Eddy William Katuari (Wings) 1,3 billion dollar AS 11. Murdaya Poo dan Siti Hartarti (Berca) 1,1 billion dollar AS 12. Hashim Djojohadikusumo (Tirtamas) 950 million dollar AS 13. Susilo Wonowidjojo (Gudang Garam) 890 million dollar AS 14. Mochtar Riady (Lippo) 805 million dollar AS 15. Prajogo Pangestu (Barito) 805 million dollar AS.
Credit : Globe Asia
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