Rising global uncertainty has accelerated efforts to diversify global investment portfolios away from assets dominated by the United States and China. This diversification trend is opening opportunities for emerging markets like Indonesia to attract foreign investment. However, challenges remain, including heightened volatility and underdeveloped local capital markets.

Trinh Nguyen, Senior Economist for Emerging Asia at Natixis, explained that there is now a growing global awareness that relying too heavily on a single type of asset carries significant risks. “Everyone agrees that overexposure to one asset is dangerous, but the real issue is how to reduce that reliance and what the associated costs are,” she stated during a National Press Foundation workshop in Singapore recently attended by Bisnis.

According to Trinh, as investors begin to shift away from traditional instruments like U.S. Treasury bonds, they seek alternatives with more attractive returns. Yet, such transitions cannot occur rapidly due to high switching costs and limited market depth in alternative destinations, especially in developing countries. One such example is Indonesia’s bond market, which she believes remains relatively shallow in scale compared to that of the U.S.

“Indonesia’s bond market totals only about US$500 billion. In contrast, U.S. Treasuries are worth around US$30 trillion. So if a large influx of investors enters simultaneously, prices could spike significantly, increasing the associated risks,” she explained.

Nonetheless, Trinh believes Indonesia continues to offer investment appeal amidst global deglobalization trends and the restructuring of global supply chains. While Chinese bond yields have dipped below 2% and returns in developed markets are stagnating, Southeast Asia offers better growth potential with risk levels that remain acceptable to international investors.

On the other hand, Trinh dismissed concerns about potential financial crises, particularly those linked to currency depreciation. She cited the temporary negative sentiment toward the Indonesian rupiah in February and March 2025, when the exchange rate breached the psychological threshold of Rp17,000 per U.S. dollar. “Many were quick to compare that moment to the 1997 Asian Financial Crisis, but the situations are fundamentally different,” she clarified.

She also noted that mild depreciation trends are evident in other countries, such as India. According to Trinh, the Indian rupee consistently weakens by about 1.5% annually, aligning with the central bank’s policy to prevent an overly strong currency. “If you look at the data, such depreciation does not indicate a crisis, but rather reflects a deliberate monetary policy,” she said.

Furthermore, Trinh emphasized that while global financial markets are undergoing a major shift, the transition is gradual as investors need time to realign their portfolios. In the short term, U.S. and Chinese markets will remain dominant, but interest in emerging markets like Indonesia is expected to grow—especially from investors seeking diversification and higher yields.

“U.S. bond markets will still find their buyers, just as Indonesia’s market will continue to attract interest. So even if a trade war splits the world or disrupts global stability—with the added unpredictability of figures like Trump—the turmoil in financial assets has not reached the level many fear,” she concluded.