Foreign Investors Pull Out $1.2 Billion from IDX

JAKARTA, investortrust.id – The Indonesia Stock Exchange, or IDX, has reported that foreign investors have executed a net sell of approximately Rp 19 trillion ($1.2 billion) within just two months, from January to February 2025.

IDX President Director Iman Rachman disclosed this during a recent media briefing. “As of February 27, foreign investors have recorded a year-to-date net sell of nearly Rp 19 trillion,” he stated.

This marks a significant shift from last year when foreign investors were net buyers of Rp 17 trillion. However, since the fourth quarter of 2024, selling pressure has intensified, surpassing net buying activity.

Declining JCI and Global Pressures

Rachman also acknowledged that the Jakarta Composite Index (JCI) declined by around 5% in the past week, from February 21-27. He attributed market movements to three key factors: global economic conditions, domestic economic trends, and corporate performance.

On the global front, he pointed out that the ongoing trade tariff tensions between the United States and its key partners continue to be a major market driver.

“Trade tariffs between the U.S. and its partners are a constant factor. Trump 2.0 is not making things easy. As Mari Pangestu [former Indonesian trade minister] mentioned recently, about 70% of foreign funds are shifting to U.S. equities. So, naturally, foreign capital is flowing into the U.S.,” Rachman explained.

Higher Interest Rates and MSCI Downgrade Weigh on Market

Apart from trade tensions, the IDX has also noted concerns regarding U.S. Federal Reserve (Fed) policies. Market participants had anticipated multiple rate cuts, but the Fed has signaled only a single cut in 2025, reinforcing a "higher for longer" stance on interest rates.

“Interest rates are a key driver for equity markets. When U.S. interest rates rise, investors tend to favor fixed-income instruments over equities,” Rachman added.

Another significant factor impacting foreign investment in the IDX is the downgrade of Indonesia’s weight in the MSCI index, which has contributed to the JCI’s weakness.

Rachman emphasized that foreign investors currently account for around 40% of IDX’s total market participation, while the remaining 60% consists of domestic investors, predominantly retail traders.

“In the past, it was 70% domestic and retail investors. When markets dipped, local investors would buy the dip. Now, as retail investors retreat, the domestic market is under more pressure,” he explained.

Corporate Earnings Disappoint Market Expectations

The JCI’s slide below 6,300 has also been linked to earnings reports from major listed companies for the 2024 fiscal year. Many firms reported growth, but their financial results fell short of analyst consensus estimates, further weighing on market sentiment.

“These factors have compounded the challenges we are seeing,” Rachman concluded.