DIGIVESTASI - Foreign investors have started their inflow into the domestic financial market. This significant inflow of foreign funds was recorded again after not occurring since the third week of May 2024. This increase came after concerns among market participants slowly subsided.

Bank Indonesia (BI) announced transaction data for the period of June 24-27, 2024, which noted that foreign investors made net purchases of IDR19.69 trillion, close to the IDR20 trillion mark. The purchases consisted of net purchases of IDR8.30 trillion in the Government Securities (SBN) market, IDR2.23 trillion in the stock market, and IDR9.16 trillion in Bank Indonesia Rupiah Securities (SRBI).

The total foreign net purchases of almost IDR20 trillion is very surprising, considering that the last time something similar happened was in the third week of May 2024, about 1.5 months ago, with foreign net purchases reaching IDR22.06 trillion dominated by SRBI.

During 2024, based on settlement data until June 27, 2024, foreign investors recorded net sales of IDR36.46 trillion in the SBN market, net sales of IDR9.78 trillion in the stock market, while making net purchases of IDR123.21 trillion in SRBI.

In early June until June 21, 2024, there was significant selling pressure from foreign investors amid various uncertainties and negative sentiments, particularly in the Indonesian government bond (SBN) and stock markets.

The substantial outflow of capital from Indonesia's financial markets became a major concern for many parties, as it contributed to the depreciation of the Indonesian rupiah. President Joko Widodo even summoned Finance Minister Sri Mulyani and Bank Indonesia (BI) Governor to explain this issue.

Irvan Susandy, Director of Trading and Member Regulation at the Indonesia Stock Exchange (BEI), acknowledged that stocks experiencing the largest net foreign sales added additional pressure on the performance of the Composite Stock Price Index (IHSG).

Another factor contributing to the decline of the IHSG and foreign selling was the Federal Reserve's hawkish policy, which increased yields on US Treasury bonds, thereby putting pressure on emerging markets including Indonesia.

Furthermore, domestic economic data such as the widening current account deficit from US$1.1 billion to US$2.2 billion in the first quarter of 2024, the decrease in Indonesia's Manufacturing Purchasing Managers' Index (PMI) from 52.9 to 52.1 in May 2024, and the decline in Consumer Confidence Index (CCI) from 127.7 to 125.2 in May 2024, also influenced market sentiment.

Additionally, concerns about Morgan Stanley's underweight position on Indonesian stocks further exacerbated conditions in the domestic financial markets, primarily due to the potential for a larger fiscal deficit and a debt-to-GDP ratio approaching 50%.

In response to these issues, a Press Conference on the Current Economic Fundamentals and the Draft State Budget (RAPBN) 2025 was held last week. The conference was attended by Coordinating Minister for Economic Affairs Airlangga Hartarto, Finance Minister Sri Mulyani, and Financial Sector Task Force Member Thomas Djiwandono at the headquarters of the Directorate General of Taxation of the Ministry of Finance.

During the conference, the government and the Prabowo team reaffirmed their commitment to prudently execute the 2025 State Budget, while maintaining a maximum deficit limit of 3% of GDP and a maximum debt ratio of 60% of GDP. This statement aimed to alleviate concerns that government spending policies could lead to a deficit exceeding 3% and approaching 60% for the debt-to-GDP ratio.

"The debt-to-GDP ratio that was previously possible a few weeks ago reported to reach more than 50% is not possible," Thomas said.

He emphasized that the 2025 Draft State Budget deficit will remain well below the safe limit for the debt-to-GDP ratio in accordance with the State Finance Law.

Aside from the fundamental aspects of RI, the Indonesia Stock Exchange (IDX) steps to revise several criteria for special notation stocks that could potentially enter Full Call Auction (FCA) has increased positive sentiment towards JCI.

The IDX has made changes to several criteria for special notation stocks that could potentially enter the FCA, by revising criteria numbers 1, 6, 7, and 10 as follows:

Foreign investors are increasingly interested in the domestic financial market as SRBI yields increase, encouraging them to invest.

At the Commission XI Working Meeting on Monday (24/6/2024), Bank Indonesia Governor Perry Warjiyo stated that the increase in the SRBI interest rate was to increase its attractiveness.

"We raised the SRBI interest rate to make it more attractive," Perry said.

He emphasized that if conditions improve, BI is ready to lower interest rates again. Previously, BI had conducted SRBI auctions and raised interest rates during the turmoil in March and April to reduce capital outflows.

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