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Senin, 12 September 2011

Wealthy Indonesia - CLSA

Much has been said about the increase of wealth in Indonesia. There are 14 billionaires in the country, according to Forbes or 21 according to Globe Asia. We believe that both numbers are massively understated. Many Indonesian billionaires are under the radar screen, especially if they own private companies. Indonesia probably has the highest number of private jets in Asean. In Bali, there is a separate terminal for private jets. Sure not a big deal, PJ owners like to roll in style. But in Jakarta, we even have separate airport for PJ travelers.

Our HoR Dee and CLSA HoR for special projects Amar Gill explore how the number of high net worth individuals (HNWI) in Indonesia, defined as those with at least US$1mn in investable income, will rise in coming years. The total amount of deposits in the Indonesian banking system is up 7% YTD to Rp. 2432tn ($285 bn).

What we also found interesting is that despite the phenomenal growth in the number of HNWI, our friends in the private banking industry in Singapore told us that they have a hard time getting new assets from wealthy Indonesians.

True that the wealth is being created rapidly. But even more importantly, for the first time in memory, the wealth created stays in Indonesia. If anything, offshore money is making its way back to Indonesia (although it may be disguised as FDI, “foreign” purchase of Indonesian bonds, etc). Local tycoons that were scarred from the sharp depreciation of the Rupiah during Asian Crisis are now getting comfortable to hold more Rupiah. Confidence is running high in this country.

Indonesia is poised for the fastest growth in HNWIs in Asia, at 25% cagr over the next 5 years. China comes in second with a 22.4% 5-year cagr, followed by Thailand at 21.9%. This growth will see Indonesia’s HNWI increase from the current 33,000 people to almost 100,000 by 2015.

The entrepreneurial spirit has always been strong in Indonesia. Even our informal motorcycle taxi culture “OJEK” has been institutionalized by a young entrepreneur call “Go-Jek”. Go-Jek provides you with good reliable drivers, BBM (Blackberry messenger booking – almost everyone has a BB in JKT) and most importantly a clean Helmut (trust me, that is a big value add). If you go the far flung areas of the country, you can always see plenty of small shops/kiosk sprung up in the country (we wrote a special report on Indonesian neighborhood shop/warung a while back, let me know if you would like to receive a copy).

Much of Indonesia’s wealthy have made their riches through commodity businesses. But we are already seeing a new wave of entrepreneurs building empires in domestic consumption businesses such as autos, media, and consumer goods. Domestic consumption has been remarkably strong amid global turmoil.

FDI is skyrocketing as well, which will bring more jobs to the economy. P&G, Volkswagen, Google, Air Asia, POSCO, and Lotte are just a small sample of the foreigners wanting a piece of the action here. (Industrial park plays include LPCK and SSIA)

In addition, a stronger rupiah is driving dollar wealth creation. The rupiah is among the best performing Asian currencies this year (+5%). It’s also benefiting companies with COGS that have to be imported from abroad. Over the next five years we estimate that the rupiah will appreciate close to 6% pa (we are still off 70% from pre 97). Thus in US dollar terms, we expect the Indonesian economy to grow at 23.5% pa.

The rise in wealth in Indonesia has profound effects on spending power and consumption. These effects will last at least several decades. Consumers moving up the consumption value chain. From a stock perspective the key beneficiaries are MAPI, BBCA, ACES, ASII, SMRA & LPKR. Please see Dee’s report for more details.

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