Foreign Funds Exit Indonesia Amid Soaring US Yields and Escalating US-China Trade War

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JAKARTA, investortrust.id — Foreign investors pulled Rp 24.04 trillion ($1.43 billion) from Indonesia’s financial markets this week as rising U.S. Treasury yields and an aggressive escalation in U.S.-China trade tensions rattled emerging markets.

Bank Indonesia reported the net sell occurred between April 8 and 10, driven primarily by outflows from the central bank’s monetary instrument SRBI (Securities Rupiah Bank Indonesia), government bonds, and the equity market. SRBI saw Rp 10.47 trillion in outflows, followed by Rp 7.84 trillion from government bonds (Surat Berharga Negara or SBN), and Rp 5.73 trillion from stocks.

"Based on transaction data in the second week of April (8–10 April 2025), non-residents recorded a total net sell of Rp 24.04 trillion," said Ramdan Denny Prakoso, Head of Communications at Bank Indonesia, on Saturday, April 12.

Despite the outflows, year-to-date figures show foreign investors still hold a net buy of Rp 7.11 trillion in SRBI and Rp 13.05 trillion in SBN, but have sold Rp 32.48 trillion worth of Indonesian equities.

Indonesia’s five-year Credit Default Swap (CDS) premium—an indicator of default risk—rose to 113.35 basis points as of April 10, from 105.75 bps on April 4. A higher CDS indicates rising concerns among investors about sovereign credit risk amid global uncertainty.

US Yields Soar, Rupiah Pressured

The market turbulence was also fueled by the sharp rise in U.S. Treasury 10-year yields, which jumped to 4.425%. The spike triggered a selloff in risk assets globally, including in Indonesia, as investors sought higher-yielding and safer U.S. assets.

Bank Indonesia noted that as of Thursday, April 10, the rupiah closed at Rp 16,795 per U.S. dollar, while Indonesia’s 10-year government bond yield dropped to 7.026%. On Friday morning, the rupiah strengthened slightly to Rp 16,780, while bond yields edged up to 7.06%.

The U.S. Dollar Index (DXY), which measures the greenback against six major currencies, dipped to 100.87 despite the bond rally. Analysts attributed the dollar’s softness to the currency markets already pricing in the Federal Reserve's policy stance.

Trade War Escalation Reaches Historic Levels

Market sentiment deteriorated further as the trade war between the world’s two largest economies—United States and China—intensified to unprecedented levels. Ahead of U.S. President Donald Trump’s reciprocal tariff policy, which took effect April 9, China retaliated with a 34% tariff on U.S. products, effective April 10.

Since Chinese exports were already subject to a 20% duty, the new measure pushed total import tariffs to 54%. By Saturday, April 12, both sides had imposed multiple rounds of tit-for-tat tariffs. U.S. tariffs on Chinese goods now stand at 145%, marking what economists described as the most rapid and aggressive tariff escalation in modern history.

Other countries, including Indonesia, faced a 32% reciprocal tariff that has been postponed for 90 days to allow for negotiations. However, the global economic consequences are already being felt.

China, under President Xi Jinping, responded by increasing its tariffs on U.S. goods from 34% to 84%, and then to 125%, effective April 12. In addition to tariff hikes, China lodged new complaints at the World Trade Organization (WTO) and introduced restrictions on rare earth exports and key U.S. imports, including films and education services.

Economists have warned that this extreme escalation could severely disrupt global trade and trigger recession risks, especially for emerging markets heavily reliant on exports.