Data at the IDX, the country’s bourse operator, shows that foreign investors’ share ownership climbed to Rp 1,878 trillion (US$138.4 billion) as of Dec. 12, from Rp 1,691 trillion at the end of December last year.

However, since the beginning of this year, foreign investors have been recording a net sell of Rp 41 trillion in the country’s whole capital market, a lot higher than the previous figure of Rp 22 trillion back in 2015, according to data from capital market statistics firm RTI.

“This means they did not exit the market; they just sold the shares to gain 18 percent profit,” IDX president director Tito Sulistio said in Bali recently.

Analysts agreed that investors had been taking profit from the emerging markets, including Indonesia, as they continue to monitor policy developments in major economies like the United States.

“Apart from the implementation of tax amnesty [which ended in March], the selling spree emerged as a result of investors taking profit from the excellent stock performances in Indonesia’s capital market,” said Hans Kwee, an analyst at Investa Saran Mandiri.

He pointed out that foreign investors had been moving to foreign bond markets, with net buy worth around Rp 157 trillion as of this year, amid improvements in the US economy that prompted the Federal Reserve (Fed) to subsequently raise its fund rates several times.

The ongoing tax reform plan to cut corporate tax rates in the world’s biggest economy had also affected sentiments in global financial markets, he added.

First Asia Capital analyst David Sutyanto said increases in Fed fund rate might send foreign investors away further as they would start looking for assets with higher rates in other markets.

However, he said once corrections at the Jakarta Composite Index (JCI) — the main gauge of IDX — were taking place, prices would be more attractive and drive investors back to the local bourse.

The JCI closed the trading day on Friday at 6,119.42, higher 5.77 points or 0.09 percent compared to the previous close.

According to IDX’s assessment, the increase of share ownership among foreign investors in Indonesia’s capital market indicated a good fundamental in the country’s economy.

In an effort to maintain investors’ confidence, Tito said the bourse would continue boosting market capitalization with a booking target of Rp 10,000 trillion within two years, from Rp 6,799 trillion as of Friday.

Market capitalization is an indicator of developments in the stock market.

In general, the greater the market cap, the more attractive it would be for investors.

Tito said one way to reach the Rp 10,000 trillion target was to expedite initial public offerings (IPO) for nine subsidiaries of state-owned companies next year out of the 35 firms targeted.

This year, the IDX expects that 34 companies list their shares.

If 52 foreign companies operating in Indonesia — including the local unit of US mining giant Freeport McMoRan — conduct a dual-listing mechanism, it would help boost market capitalization of the local bourse, Tito added.

He said a number of important events taking place next year, including regional elections as well as the 2018 Asian Games, would pose challenges to the local bourse as investors might cash out as much as Rp 40 trillion to Rp 50 trillion of their funds from banks.

“There would be huge amount of funds taken out of banks. If the money came back fast, I would not be worried,” he added. (fny)

Popular

RI, Australia strengthen partnership on taxing crypto assets

Analysis: Indonesia denies normalization with Israel to enter OECD

Citroen to produce electric cars in Indonesia