Investors Shift to Bonds as Returns Outperform Stocks

More investors are moving away from stocks and shifting towards bonds, as bond yields continue to outperform equities.

Handy Yunianto, Head of Fixed Income Research at Mandiri Sekuritas, reported that the Bloomberg Indonesia Local Sovereign Bond (BINDO) recorded a 4.66% return throughout 2024, significantly surpassing the Jakarta Composite Index (JCI) yield, which contracted by 2.19%.

This trend has continued into 2025, with Indonesia’s bond returns rising by 2.19% year to date (YTD), while the JCI dropped 7.97%.

"Investors are favoring bonds over equities due to macroeconomic factors, especially with the slowing global economy, making bonds a more attractive option," Handy stated during a Ramadan Iftar event in Jakarta on Wednesday (March 19, 2025).

Handy also noted that institutional investors, including insurance companies and pension funds, are continuing to accumulate bond holdings. In 2024, the insurance and pension fund sectors recorded a net buy of IDR 103.9 trillion, while retail and foreign investors absorbed IDR 107.2 trillion and IDR 34.6 trillion, respectively.

The JCI's performance remained weak throughout 2024, falling by 2.65%, in stark contrast to its 6.16% surge in 2023. This decline mirrors JCI’s 2018 performance, when it also dropped by 2.54%.

Asset Shift Toward Bonds and Gold

The shift from equities to bonds has also been acknowledged by Bank Indonesia (BI). Governor Perry Warjiyo highlighted that there is a global shift in investment portfolios, including in Indonesia.

According to Perry, investors are reducing their stock allocations and moving into other assets such as gold.

"In the past, nearly all investment portfolios—whether stocks, bonds, or other securities—were focused on the United States," Perry stated in a press conference on Wednesday (March 19, 2025).