International Market Turmoil Eased, Capital Inflow Still Slightly Restrained

Rupiah and US Dollar

The international financial market, which has contributed to high uncertainty, is now starting to subside. However, Minister of Finance Sri Mulyani Indrawati revealed that the flow of foreign funds to Indonesia or capital inflow is still a bit restrained.

Sri Mulyani revealed that the dragging capital inflow forced Indonesia to immediately pay close attention to sentiment on financial markets.

Even though the financial market turmoil has begun to subside, indicators from the United States Central Bank (The Federal Reserve) to maintain benchmark interest rates are still high. This decision will certainly contribute sentiment to the domestic financial market.

“The volatility index of the stock and bond markets has decreased and the level of Indonesia’s credit default swap has decreased. This means that the perception of risks to Indonesia is getting better,” said Sri Mulyani at the Our State Budget conference, Wednesday (22/2/2023).

Unfortunately, said Sri Mulyani in the presentation presented, it indicated that investors were still holding back their investment in Indonesia. So that foreign funds aka inflow began to be a bit ‘drag’.

It was explained that the Indonesian bond market until February 20, 2023 (year to date), recorded an inflow of IDR 43.9 trillion.

“Although in the last few days, there has been an outflow,” explained Sri Mulyani. The outflow that occurred on the government bond or SBN market in February 2023 was recorded at IDR 6.7 trillion.

Outflows that have occurred in recent times have occurred in several developing market countries or Emerging Markets, said Sri Mulyani as she is still observing the Fed’s hawkish stance.

“This is what the Fed’s stance says determines sentiment towards capital flows, especially short-term stocks, and bonds,” said Sri Mulyani again.

Currently, SBN ownership is still dominated by banking and Bank Indonesia ownership. While foreign owners have continued to decline since 2020.

Sri Mulyani noted that foreign ownership is currently only 14.8%, lower than foreign ownership of SBN in 2020 which amounted to 25.2%.