KONTAN.CO.ID - JAKARTA.  JAKARTA. The pressure of foreign investors selling in the domestic financial market, particularly in bonds, continues. Foreign investors are actively selling their bond holdings due to the prospect of high-interest rates and escalating conflicts in the Middle East.

According to Bank Indonesia (BI), based on transaction data from April 16 to 18, 2024, foreigners made a net sale of IDR 21.46 trillion. The details are as follows: a net sell of about IDR 9.79 trillion in the Government Securities (SBN) market, a net sale of IDR 3.67 trillion in the stock market, and a net sale of IDR 8 trillion in Bank Indonesia Rupiah Securities (SRBI).

Thus, from the beginning of the year until April 18, 2024, foreigners recorded a net sale of about IDR 38.66 trillion in the SBN market, a net purchase of IDR 15.12 trillion in the stock market, and a net purchase of IDR 12.90 trillion in SRBI.

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Fudji Rahardjo, Chief Dealer of Fixed Income & Derivatives at Bank Negara Indonesia (BNI), observed that the outflow of foreign funds from developing countries, including Indonesia, at the beginning of 2024 was influenced by high-interest rates in the United States (US) and escalating conflicts in the Middle East.

As known, the probability of The Fed cutting interest rates has been pushed back to September 2024 from the previously estimated June 2024. In addition, both Israel and Iran have carried out attacks that have the potential to trigger a third world war.

“As a result, the yield of SBN and the exchange rate of the rupiah against the US dollar briefly soared to the highest level since the 2020 pandemic, following news of Iran's attack on Israel after Eid,” Fudji told Kontan.co.id on Monday (22/4).

Last week, the rupiah fell to its lowest level in April 2020 at IDR 16,260 per US dollar. Amid the depreciation of the rupiah, the yield of the 10-year SBN broke above 7%.

According to Fudji, the trend of foreign fund outflows in developing countries is expected to decrease when The Fed starts cutting its interest rates. This is because US inflation and employment data provide significant sentiment for global market movements.

“In addition, foreign investors are likely to look back at risky assets if geopolitical conflicts in the Middle East or Russia-Ukraine subside,” he added.

Amid the diminishing global uncertainty, foreign interest in the domestic market is likely to increase if Indonesia's fundamental conditions remain stable during the transition of the new government.

Fudji also believes that if there is an increase in Bank Indonesia's (BI) interest rate, it could hinder the outflow of funds. However, geopolitical conflict factors still overshadow the prospect of these fund flows.

Editor: Syamsul Azhar