Foreign Capital Inflows Strengthen Indonesia’s Financial Market and Rupiah

Bank Indonesia (BI) reported that in the first week of March 2025, Indonesia’s financial market received foreign capital inflows totaling Rp8.99 trillion, primarily into stocks and government bonds (SBN).

According to BI’s Head of Communications Department, Ramdan Denny Prakoso, foreign investors generally maintained their interest in Indonesian assets, except for Bank Indonesia Rupiah Securities (SRBI), where net selling occurred.

"Based on transactions recorded between March 3-6, 2025, foreign investors posted a net buy of Rp8.99 trillion, consisting of Rp0.34 trillion in stocks, Rp9.53 trillion in SBN, and a net sell of Rp0.88 trillion in SRBI," Denny stated in an official release on Saturday (March 8, 2025).

This marks the first net buy in the stock market after six consecutive weeks of selling. Since late January 2025, foreign investors had been consistently selling off their stock holdings, peaking in the last week of February.

Meanwhile, on March 4, 2025, the government conducted an auction for Sovereign Debt Securities (SUN), successfully securing Rp30 trillion from eight bond series.

Year-to-date, foreign investors have recorded a net sell of Rp20.12 trillion in stocks, a net buy of Rp19.01 trillion in SBN, and a net buy of Rp6.11 trillion in SRBI.

Coinciding with these capital inflows, Indonesia’s five-year credit default swap (CDS) premium dropped to 76.28 basis points (bps) as of March 6, 2025, from 77.79 bps on February 28, 2025.

At the same time, the rupiah strengthened, opening at Rp16,320 per US dollar on Friday (March 7, 2025), up from Thursday’s (March 6, 2025) closing level of Rp16,325 per US dollar. Bloomberg data showed the rupiah closing Friday’s trading session up 0.28% or 45 points at Rp16,294 per US dollar, while the US dollar index weakened by 0.22% to 103.800.

In the bond market, the yield on Indonesia’s 10-year SBN increased from 6.85% on Thursday to 6.87% on Friday. Meanwhile, the US Treasury 10-year note yield rose to 4.278% on Thursday (March 6, 2025).

Bank Indonesia attributed the recent rupiah appreciation to foreign capital returning to the stock market after a sharp depreciation earlier in the week, which saw the rupiah nearing Rp16,600 per US dollar.

BI’s Director of Monetary Management and Securities Asset Department, R. Triwahyono, explained that last week’s rupiah weakness was largely driven by substantial capital outflows from the stock market. However, a shift occurred following JP Morgan’s rating upgrade on Indonesian banking stocks, including BCA, which boosted investor confidence.

"This triggered a reversal in capital flows, and we observed a significant rebound in Indonesia’s stock market. This resurgence in foreign investor interest also contributed to the rupiah’s strengthening," Triwahyono stated during a media briefing on Thursday (March 6, 2025).

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