Since mid-April, about $2 billion in foreign money has flowed out of rupiah-denominated debt in part of a global trend for capital returning to U.S. markets as investors look to rising bond yields and a stronger dollar.
The sell-off in local bonds has also created a spiral effect for U.S. dollars as investors convert proceeds, weakening the rupiah currency against the U.S. dollar. Meanwhile, foreign investors typically sell down Indonesian equities when the rupiah weakens since local company earnings become less attractive in dollar terms.
Over the past two weeks, foreigners have dumped almost $600 million in local equities. EIDO also experienced about $43 million in outflows over the past two weeks.
Despite the changes in the global dynamics, Indonesia’s economy shows strong fundamentals with robust economic growth. The economy expanded 5.1% in the first quarter of 2018, the same growth rate for all of 2017, which was also its best annual performance since 2013.
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