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Market Research Report

Wealth in Indonesia: Sizing the Market Opportunity 2016

Published by GlobalData Product code 408689
Published Content info 46 Pages
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Wealth in Indonesia: Sizing the Market Opportunity 2016
Published: December 9, 2016 Content info: 46 Pages
Description

Summary

The Indonesian affluent market is small but is set for continuous strong growth. Indeed, the proportions of HNW and mass affluent individuals compared to its overall size are unremarkable, and it is only the strong growth rates that are predicted that make the market so attractive. Deposits account for a lower proportion than the regional average, while bonds continue to flourish. Outside of the onshore liquid market, local HNW individuals show strong appetite for property investment, while concerns about economic stability have pushed investors to hold assets offshore. However, the election of President Joko Widodo late in 2014 brings stability and optimism, and the recent passing of a tax amnesty is expected to make significant amounts available for government spending.

Key Findings

  • Indonesia's large and fast-developing economy is driving growth of retail assets. While the market is relatively small considering that Indonesia is the fourth most populous nation in the world, its growth rates have been impressive and look set to continue (albeit at a more moderate pace) going forward.
  • Take-up of pro-cyclical investments such as equities and mutual funds remains low, and deposits remain by far the preferred choice despite recent interest rate cuts.
  • The Indonesian affluent account for only a tiny proportion of the total population, but are growing in number. As of 2015 Indonesia's high growth rate has resulted in an affluent population of 1.2 million, and this is expected to expand to 1.75 million by 2020.
  • HNW individuals are yet to embrace more complex alternative products, with 94% of HNW onshore wealth held in cash. The remaining 6% largely goes into property investments (either directly or funds), but a healthier outlook for commodities may encourage interest in more sophisticated wealth management products from local providers in this space going forward.

Synopsis

Verdict Financial's "Wealth in Indonesia: Sizing the Market Opportunity 2016" analyzes the Indonesian wealth and retail savings and investments markets, with a focus on the HNW segment. The report is based on our proprietary datasets.

Specifically the report:

  • Sizes the affluent market (both by the number of individuals and the value of their liquid assets) using our proprietary datasets.
  • Analyzes which asset classes are favored by Indonesian retail investors and how their preferences impact the growth of the overall savings and investments market.
  • Examines HNW clients' attitudes towards non-liquid investments such as hedge funds, property, and commodities.
  • Identifies key drivers and booking centers for offshore investments by Indonesian HNW clients.

Reasons To Buy

  • Benchmark your share of the Indonesian wealth market against the current market size.
  • Forecast your future growth prospects using our projections for the market to 2020.
  • Identify your most promising client segment by analyzing penetration of affluent individuals in Indonesia.
  • Evaluate your HNW proposition by understanding the investment mix of the local onshore investment market.
  • Review your offshore strategy by learning HNW motivations for offshore investments and their preferred booking centers.
Table of Contents
Product Code: VF0046CI

Table of Contents

EXECUTIVE SUMMARY

  • Key findings
  • Critical success factors

SIZING AND FORECASTING THE WEALTH MARKET IN INDONESIA

  • Following a 2015 dip, Indonesia's strong economic outlook will drive continued wealth creation
    • The affluent population numbers over 1.2 million, and will continue to grow rapidly
    • The majority of onshore wealth is concentrated among the mass affluent

DRIVERS FOR GROWTH IN THE INDONESIAN WEALTH MARKET

  • The retail investment market will continue to record robust growth
    • The Indonesian retail investment market is more diversified than most markets in Asia Pacific
    • The Sharia investment market has enormous potential for growth
  • Indonesia's large and fast-developing economy is driving the growth of all savings and investment asset classes
    • A successful tax amnesty boosted investment growth in 2016
    • Economic growth will remain robust, and together with relatively high interest rates will be a key driver of deposit growth
    • GDP growth will continue to stimulate the bond market, particularly as the country invests in much-needed infrastructure
    • The Jakarta Stock Exchange lost 12% in 2015, but future growth forecasts have buoyed confidence in equities and mutual funds

HNW INVESTMENT PREFERENCES

  • The onshore portfolios of Indonesian HNW individuals are concentrated in simple traditional assets
    • Wealth managers have not been able to get HNW individuals significantly invested in alternatives
    • Alternatives should continue to grow as a proportion of HNW investments
  • Offshore banking is still a major force in the Indonesian HNW market
    • Local private bankers still have a lot of work to do to persuade HNW individuals to reinvest onshore
    • HNW individuals claim that local political instability deters them from investing at home
    • Tax efficiency appears to be a limited driver for offshore investments - but is that the full picture?
    • Singapore has been the primary but not sole beneficiary of offshore investment by Indonesians

APPENDIX

  • Abbreviations and acronyms
  • Supplementary data
  • Definitions
    • Affluent
    • Domicile
    • DTC
    • FATCA
    • HNW
    • Liquid assets
    • Mass affluent
    • Onshore
    • Residency
    • Sharia investments
    • Exchange of information
    • TIEAs
  • Methodology
    • Verdict Financial's 2016 Global Wealth Managers Survey
    • Verdict Financial's Global Wealth Model methodology
    • Verdict Financial's Global Retail Investments Analytics methodology
    • Exchange rates
  • Bibliography
  • Further reading
  • About Verdict Financial
  • Disclaimer

List of Tables

  • Table 1: Indonesian personal income tax rates, 2016 calendar year
  • Table 2: Indonesia: adult population segmented by affluent category and asset band (000s), 2011?15
  • Table 3: Indonesia: adult population segmented by affluent category and asset band (000s), 2016e?20f
  • Table 4: Indonesia: total liquid wealth segmented by affluent category and asset band ($bn), 2011?15
  • Table 5: Indonesia: total liquid wealth segmented by affluent category and asset band ($bn), 2016e?20f
  • Table 6: Indonesian rupiah-US dollar exchange rate, December 31, 2014 and December 31, 2015

List of Figures

  • Figure 1: Indonesian affluent individuals account for a tiny proportion of the total population, but this is growing
  • Figure 2: The onshore market is dominated by mass affluent individuals
  • Figure 3: The savings and investments market is expected to grow by 7% each year up to 2020
  • Figure 4: Asset allocation on the whole looks set to remain unchanged
  • Figure 5: Deposits will continue to attract the bulk of retail savings
  • Figure 6: Deposit growth will continue to mirror moderate GDP growth forecasts
  • Figure 7: Steady GDP growth will see bonds maintain a share of retail holdings
  • Figure 8: Agriculture and consumer goods have been led the local stock market to all-time highs
  • Figure 9: Growth in equity and mutual fund holdings has been tightly correlated to the performance of the main domestic stock index
  • Figure 10: Equity funds are by far the most popular product within the overall mutual fund market
  • Figure 11: The HNW market in Indonesia is still underserved by more exotic investments
  • Figure 12: Indonesian HNW individuals hold 41% of their liquid wealth abroad
  • Figure 13: HNW individuals claim that local political instability is driving them to invest offshore
  • Figure 14: Singapore accounts for more than half of HNW Indonesians' offshore investments
  • Figure 15: TIEAs have mostly been reached with British protectorates and tax havens
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