Jakarta, Indonesia Sentinel — Foreign capital is flowing out of Indonesia’s domestic financial market amid signs of a strengthening U.S. economy. According to data from Bank Indonesia (BI), foreign investors recorded a net sell of IDR 6.63 trillion across various markets between October 21-24, 2024. This includes IDR 4.53 trillion in net selling of Government Securities (SBN) and IDR 3.01 trillion in stocks, while Bank Indonesia Securities Rupiah (SRBI) experienced a slight net buy of IDR 0.91 trillion.
The ongoing foreign sell-off extends a three-week net selling trend, totaling over IDR 10 trillion. However, data for 2024 up to October 3 reveals foreign investors made net purchases of IDR 191.75 trillion in SRBI, IDR 49.92 trillion in stocks, and IDR 36.42 trillion in SBN.
This outflow coincides with a surge in the U.S. Dollar Index (DXY) and the 10-year U.S. Treasury yield, prompting capital to temporarily return to the U.S. Investors’ outlook on the Federal Reserve’s monetary policy also plays a role. Hopes for a substantial rate cut in November’s FOMC meeting have diminished; a 50 basis-point cut probability dropped from 58% in late September to 0%, while the likelihood of a 25 basis-point cut has risen sharply from 42% to 95%.
According to Renno Prawira, an economist at Ciptadana Sekuritas Asia, U.S. political uncertainty ahead of the 2024 presidential election is also bolstering the dollar. Investor anticipation of a potential Trump victory, based on past trends, may impact currency strength.
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The strengthening dollar aligns with the U.S. economy’s recent employment data, which exceeded expectations. The U.S. added 254,000 jobs in September 2024, far surpassing the 140,000 forecast, marking the strongest six-month job growth. Unemployment fell to 4.1%, the lowest in three months, with the labor force participation rate holding at 62.7% and the employment-population ratio increasing to 60.2%.
Foreign ownership in Indonesia’s SBN has dipped slightly due to these trends, as shown by the Directorate General of Financing and Risk Management (DJPPR) data, with foreign ownership dropping from 15.06% on October 21 to 15.05% on October 25, 2024.
(Becky)
