Exclusive: M.Stanley trumps Goldman in Indonesia brokerage deal

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Morgan's move to expand in Indonesia, recently lifted to a sovereign investment grade status, follows Nomura Holdings <8604.T> and Citigroup who last year ramped up equity teams in Jakarta to challenge leaders Credit Suisse and Deutsche Bank .

The deal still requires regulatory approval. A full broking license would allow Morgan Stanley to cover the secondary side of sales and trading as well as research in a country that saw a record high stock market <.JKSE> last year and is expected to see new fund inflows in the wake of the ratings upgrade.

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Graphic on top deal underwriters in Indonesia: http://link.reuters.com/qyz36s

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Indonesia sets almost no ownership limits for foreign investors who want to own a stock brokerage but a brokerage firm must be a member of the country's stock exchange to trade Indonesian stocks among its members.

The stock exchange currently has 120 members and will not issue anyone new memberships, so if any foreign banks want to join they must buy an existing members' seat, said Eddy Sugito, a listing director at the Indonesia stock exchange.

One source with knowledge of the progress of the deal said Tiga Pilar agreed to open talks with Morgan Stanley because Goldman appeared to show insufficient enthusiasm after completing its due diligence.

The deal value is likely to be in the low millions as Morgan Stanley is only seeking to buy the brokerage license but it will need to inject at least billion rupiah ($6 million) in license costs and required brokerage capital.