Stocks Plunge, Foreign Funds Flow to SBN and SRBI

JAKARTA, KOMPAS - Foreign investors are still actively withdrawing their investment funds from the stock market. Meanwhile, foreign investment remains relatively stable in the domestic debt securities market, such as in State Securities and Bank Indonesia Rupiah Securities products. The uncertainty of both global and national economies is causing investors to shift to low-risk investment instruments.

Bank Indonesia reported that from the beginning of 2025 until February 6, foreign investors recorded a net sell of IDR 2.85 trillion in the stock market. Meanwhile, in the Government Securities (SBN) market, a net buy of IDR 10.73 trillion was recorded, and in the Bank Indonesia Rupiah Securities (SRBI), a net purchase of IDR 10.44 trillion was recorded.

Senior Investment Information Mirae Asset Sekuritas Indonesia Mohamad Adityo, in Jakarta, Thursday (13/2/2025), said that the withdrawal of foreign investor funds in the capital market, who are selling stock products, is still greater than the purchase value since October 2024.

The outflow of foreign funds is still substantial even in the second month of 2025. The total net selling value of foreign investors from the beginning of February until Wednesday (12/2) has reached IDR 5.5 trillion. The flight of foreign investment aligns with the weakening of the Composite Stock Price Index (IHSG), which in recent days has fallen below 6,500 from its position at the 7,000 level at the beginning of February.

"Until now, we see that there has not been any buyback action from foreign investors that is still increasing. Although nominally it has started to decrease significantly. However, the purchasing power or demand for Indonesian stocks is still not good," he explained.

Meanwhile, the bond market, such as SBN, remains stable. In fact, the rupiah, which has recently weakened again to a level above Rp 16,000, does not affect the appetite of foreign investors, who make up 14 percent of the total investors, to keep their money in SBN.

"Usually, when there is a sell-off in the bond market, the rupiah also weakens. Now, foreigners are not selling, but the rupiah is weakening more due to external factors (US dollar expenditure)," he said.

Foreign investors are also still relatively holding on to Bank Indonesia's debt product, SRBI, which was released in September 2023. The outstanding value or funds managed by BI from investors as of the end of January was IDR 849 trillion, or slightly down from the peak outstanding value as of November 2024.

The SRBI outstanding value, 27 percent of which is owned by foreign investors. "But the last three months have started to decline somewhat along with the decline in yields. So, the SRBI interest rate has fallen below the sale of SBN, so foreign investors are more active in SBN," said Adityo.

The trend of declining yields occurred at the beginning of 2025. According to the Bareksa website, on January 24, the SRBI yield fell to 6.84 percent, below the SBN which was 7.08 percent. By February 7, 2025, the SRBI yield had dropped again to 6.57 percent, lower than the SBN which was still 6.67 percent.

Chief Economist & Head of Research at Mirae Asset Sekuritas, Rully Arya Wisnubroto, in a separate interview, explained that the large-scale sell-off by investors in the stock market is caused by both external and internal factors in Indonesia.

One of them is still related to the sentiment of US President Donald Trump's policy. The Trump phenomenon, according to him, also occurred during his leadership, after being elected in 2016. "Until the start (of his leadership) in 2017, there was an outflow (foreign funds leaving) all in the stock market," said Rully.

While in 2017, the Indonesian economy positively supported the stock market with President Joko Widodo's pro-development and infrastructure policies, President Prabowo Subianto's government this time was unable to withstand foreign pressure. This was due to policies that contradicted domestic economic growth.

"Among other things, yesterday finally Mr. Prabowo reduced the budget, yes, cutting the budget spending by almost IDR 300 trillion. Based on the latter, the allocation will probably be more for the free nutritious meal program and the second is for downstreaming. Well, but, all of this is still unclear," he said.

Another factor is the heavy burden on state-owned banks that must support government programs, such as 3 million subsidized houses, to debt relief and relaxation for MSMEs. The burden of performance is associated with the decline in the share prices of state-owned banks that have been targeted by many foreign investors.

Meanwhile, the Indonesian government also does not have a significant policy to support medium-term economic growth in 2025. For that, according to him, the market is waiting for monetary stimulus regulated by BI. The Indonesian central bank is expected to lower interest rates which are currently at 5.75 percent.

"So, the only main key is whether BI will dare to lower interest rates or not," said Rully.

On a separate occasion this week, Economist of PT Pemeringkat Efek Indonesia (Pefindo) Suhindarto, assessed that BI will likely be more rigid in taking monetary easing policies. This means that interest rate cuts will likely be more limited in 2025.

This is driven by the government's need to borrow and pay interest on debt from SBN issuance, which could reach Rp800 trillion. Maintaining higher interest rates will increase the attractiveness of investors to invest in SBN.

"The supply and demand for the issuance of bonds is expected to increase, causing yields to tend to be more rigid to be lowered, even though there is still a monetary easing policy," said Suhindarto.