Foreign Funds Exit Indonesian Stock Market – Will They Return?

The Indonesian stock market is under significant pressure as foreign funds continue to flow out, with major banking stocks being the most sold. Based on data from the Indonesia Stock Exchange (IDX), foreign net sell reached Rp2.48 trillion on Tuesday (March 18, 2025). Cumulatively, foreign investors have recorded a net sell of Rp29.42 trillion since the beginning of 2025.

As foreign capital exits, the Jakarta Composite Index (IHSG) has taken a sharp hit. On Tuesday, IHSG plunged 3.84%, losing 248.55 points to close at 6,223.38. Year to date (ytd), IHSG has dropped 12.1% since the start of 2025. During today’s first trading session, IHSG plunged 6.12%, prompting the IDX to impose a trading halt.

Banking Stocks Lead Foreign Sell-Off

Large banks, classified as Core Capital Group (KBMI) IV, were the biggest targets of foreign selling. PT Bank Central Asia Tbk. (BBCA) recorded a net foreign sell of Rp1.53 trillion on Tuesday, bringing BBCA’s year-to-date net sell to Rp9.29 trillion.

Other major banks also experienced significant foreign outflows:

• PT Bank Mandiri Tbk. (BMRI) saw a net sell of Rp643 billion on Tuesday, totaling Rp6.65 trillion ytd.
• PT Bank Rakyat Indonesia Tbk. (BBRI) recorded a net sell of Rp361 billion, amounting to Rp3.18 trillion ytd.
• PT Bank Negara Indonesia Tbk. (BBNI) saw a net sell of Rp120 billion, totaling Rp1.48 trillion ytd.

According to Mirae Asset Sekuritas Senior Market Chartist Nafan Aji Gusta, investors are adopting a wait-and-see approach, considering Indonesia’s economic outlook and political stability. Additionally, Bank Indonesia’s (BI) monetary policy and interest rate decisions are key factors influencing investor sentiment.

However, Nafan also sees a potential reversal in foreign fund flows, driven by good corporate governance (GCG) practices and upcoming dividend distributions. BBCA, for example, has announced a Rp300 per share dividend for the 2024 fiscal year. The cum dividend date for BBCA in the regular and negotiated markets is set for March 20, 2025, while in the cash market, it falls on March 24, 2025. Meanwhile, BMRI, BBRI, and BBNI are set to hold their Annual General Shareholders' Meeting (AGM) next week, where dividend distribution will be one of the key agendas.

Impact of Goldman Sachs & Morgan Stanley’s Downgrade

According to Phintraco Sekuritas analyst Valdy Kurniawan, the outflow of foreign funds is also linked to global investment firms’ downgrade of Indonesian stocks. Goldman Sachs recently lowered Indonesia’s stock rating from overweight to market weight, citing economic pressures and global trade tensions.

Similarly, Morgan Stanley downgraded MSCI Indonesia’s rating from equal weight to underweight. The investment firm’s report highlighted a declining return on equity (ROE) in Indonesia, mainly due to a weakening growth environment for cyclical sectors.

Valdy believes that the rating downgrades by Goldman Sachs and Morgan Stanley have triggered negative market reactions, potentially leading to further foreign sell-offs in the coming weeks.