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Despite bleak outlook, foreign investors flock to Indonesian stock market
Share prices are relatively stagnant this year with the Jakarta Composite Index (JCI) rising only 1 percent year to date on Friday.
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Employees pass a stock price display at the Indonesia Stock Excgange (IDX). The inflow of foreign funds into Indonesian stocks continues to increase despite the country's sluggish economic growth. (Antara/Sigid Kurniawan)
T
he inflow of foreign funds into the Indonesia Stock Exchange (IDX) remained high in the past few weeks despite the country’s bleak economic outlook as seen in the country’s weak export performance and sluggish economic growth.
Analysts believe that many foreign fund managers entered the local stock exchange to benefit from the low share prices. The share prices on the IDX are relatively stagnant this year with the Jakarta Composite Index (JCI) rising only 1 percent year to date on Friday.
The slowdown in the global economy as the result of the escalation of the trade war between the world’s two giant economies, the United States and China, would continue to affect Indonesia’s foreign trade.
Exports declined by 5.12 percent year-on-year (yoy) in July to US$15.45 billion, while imports fell by 15.21 percent yoy to $15.51 billion. The fall caused Indonesia to suffer a trade deficit of $63 million during the month. Indonesia’s economic growth also slowed to 5.05 percent in the first half of this year from 5.27 percent in the same period last year.
Despite the bleak outlook, the year-to-date net foreign purchases reached a total Rp 62.29 trillion ($4.39 billion) on Friday. The figure is in contrast to foreign net sales of Rp 50.75 trillion in 2018 and Rp 39.87 trillion in 2017.
Suria Dharma, head of research at securities firm Samuel Sekuritas, said that many foreign investors moved their investments to the Indonesian equity market because the potential gains from Indonesian stocks were still relatively higher than in other markets.
Many American and European managers considered Indonesia as being among the emerging markets that could still provide higher returns.
