(Bloomberg) — Global money has flooded into Indonesia’s financial markets this month, signaling the country’s assets have quickly become a preferred investment destination as the US Federal Reserve’s easing cycle nears.
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Overseas investors have bought $933.8 million of the nation’s stocks in August, on course for the biggest monthly purchases since April 2022, while net inflows of $2.5 billion into bonds is the most in more than a year, according to data compiled by Bloomberg. The influx of money saw the rupiah briefly erase this year’s losses against the dollar, with a gain this month surpassed in Asia only by Malaysia’s ringgit.
The swing into Indonesia’s assets comes as foreign funds reduce holdings in a number of other regional equity markets including India and China in favor of Southeast Asia, which is seen as being relatively undervalued. The prospect of the nation’s central bank following the Fed to lower borrowing costs to potentially boost economic growth has boosted the appeal of the nation’s assets.
While net buying of the nation’s bonds is set to be the highest since January 2023, the rotation into stocks has driven the benchmark Jakarta Stock Index to record highs every few days through August. With Indonesia capturing the lion’s share of equity flows this month, foreigners have also been net purchasers of Malaysian and Philippine shares.
Indonesian stocks have started commanding greater heft as Asian funds ended their underweight stance on the Southeast Asian market, HSBC Holdings Plc strategists including Prerna Garg wrote in a note dated Aug. 26.
Meanwhile, Nomura Holdings Inc. strategists including Chetan Seth upgraded the country’s equities to overweight from neutral this week, saying they are “possibly the best way” to bet on emerging-market stocks as the Fed starts to cut rates.
(Updates with foreign inflows into bonds from second paragraph.)
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