Is Indonesia's Stock Exchange Still Attractive to Foreign Investors?

The Indonesian stock market remains attractive to foreign investors. This is evident from the high inflow of foreign funds into the domestic market throughout 2017. Bloomberg data shows that foreign funds entering the Jakarta Stock Exchange from January 2 to March 23, 2017, totaled Rp 6.1 trillion, with an exchange rate of Rp 13,300 per US dollar. Similarly, in the bond market, foreign fund inflows reached Rp 47.56 trillion. Therefore, the total foreign funds entering the domestic financial market reached Rp 53.4 trillion.

Continued economic growth of around 5 percent, controlled inflation, and a stable rupiah exchange rate are attracting foreign investors to Indonesia. Rating agencies Moody's and Fitch Ratings have placed Indonesia at investment grade. If Standard & Poor's raises Indonesia's debt rating to investment grade, Indonesia will become even more attractive to foreign fund managers.

Meanwhile, the United States (US) remains a primary alternative for global fund managers. The US Federal Reserve's interest rate hike and the appreciation of the dollar spurred foreign fund inflows into the US financial market throughout 2017, amounting to Rp 85.4 trillion. Conversely, Japan experienced capital flight of Rp 218 trillion. Negative interest rates and the depreciation of the yen triggered the outflow of foreign funds from the Japanese financial market.