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Foreign funds turn negative
Foreign sales continued to dominate trading on the Indonesian Stock Exchange (IDX) on Tuesday with the flow of foreign funds now negative for the year
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oreign sales continued to dominate trading on the Indonesian Stock Exchange (IDX) on Tuesday with the flow of foreign funds now negative for the year.
Tuesday's exchange data shows that foreign investors posted net sales of Rp 1.19 trillion (US$191 million), almost twice as much as the day before.
This means that in the year to date, there has been a net outflow of foreign funds of Rp 1.8 trillion.
The Jakarta Composite Index (JCI) fell by 0.24 percent to close at 4,418.87, a weak performance that analysts attributed to persistent negative sentiment brewing from the possibility that the Federal Reserve will scale down quantitative easing, a policy that until now pumped liquidity into emerging economies.
The stock market has fallen by 15.2 percent since breaching the 5,200-barrier on May 20, two days before Fed Governor Ben Bernanke released a statement of a possible pullback of quantitative easing.
'The market has been acting irrationally ' it is as if fund managers are thinking that the global liquidity will dry up instantly,' said Putut Endro Andanawarih from Manulife Asset Management Indonesia.
Quantitative easing is far from being halted and some US economic indicators remain some distance away from satisfactory, he said, adding that foreign investors would come back to the market as soon as they realized the facts of the matter.
JCI's decline was in line with other stock markets in Asia, as benchmark indexes in South Korea, Malaysia, Japan, China and the Philippines all tumbled. Nevertheless, the MSCI Emerging Markets Index still rose slightly by 0.4 percent on Tuesday due to strong market rebound in Thailand, Hong Kong and India.
'Sooner or later, investors will come back to emerging markets as they can only get modest yields and small returns on investment when they park funds in Europe or the US.' said Wilson Sofan, head of research with Reliance Securities. 'Within Southeast Asia, Indonesia remains the most attractive in terms of returns.'
The heavy selloff from foreign investors was repeated in the bond market. Investors have sold a staggering Rp 20.35 trillion of government bonds on the secondary market over the last three weeks, data from the Finance Ministry's debt management office show.
Earlier this week, prices from the Inter Dealer Market Association show that yield for the 10-year government bonds hit 7.24 percent, its highest in two years.
Finance Ministry debt management office head Robert Pakpahan said that he was 'concerned' on the recent spike in yields in the bonds market.
The combination of both external and internal factors has driven up the yields to new equilibrium levels, he said on Tuesday. 'But, I hope that investors notice that we have solved our internal problems related to fuel subsidies and will enter our market again.'
Foreign investors dumping their assets in Indonesia's stock and bond markets have put pressure to the rupiah, which fell 0.17 percent to touch 9,948 per dollar, according to the Jakarta Interbank Spot Dollar Rate (JISDOR).
BI will keep intervening the market, digging deep into its foreign exchange reserves so that the rupiah will not go beyond 10,000 per dollar, according to Manulife's Putut.
'A rupiah rate that breaches that level might not bring panic to foreign investors, but it might send jitters to our people and local investors who will get nervous psychologically.'
Other Asian stocks also mostly fell.
A gauge of the biggest Chinese shares traded in the mainland sank deeper into a bear market amid concern that a cash crunch will curb growth in the world's second-largest economy.
The MSCI Asia Pacific Index fell 0.4 percent to 125.3 as of 8:05 p.m. in Tokyo, reversing gains of 0.5 percent.
'Global markets are discounting risk and will continue to be jittery until interbank rates in China stabilize,' said Ichiro Yamada, general manager of equities who helps oversee the equivalent of $3 billion at Fukoku Mutual Life Insurance
in Tokyo.
'Japanese shares are falling along with other markets, but it's also the most resilient market because it benefits from a stronger dollar,' he was quoted as saying by Bloomberg.
