Global investors are pouring money into Indonesian equities as funds exit major Asian markets like China and India. This rotation into Indonesian stocks is happening ahead of an expected interest rate cut by the Federal Reserve. In August alone, overseas investors have bought $933.8 million worth of Indonesian stocks, marking the highest monthly purchases since April 2022, according to Bloomberg data. This would also be the second consecutive month of foreign inflows for Indonesian equities.
Investors are favoring Southeast Asian markets, which they consider relatively undervalued compared to their Asian counterparts. Besides Indonesia, foreign investors are also net buyers of Malaysian and Philippine equities this month. Indonesia, in particular, has emerged as a favorite, with its benchmark stock index reaching new highs frequently.
HSBC strategists noted that Asian funds are now giving Indonesian stocks more attention, ending their previous underweight stance. Similarly, Nomura Holdings upgraded Indonesian equities to “overweight,” highlighting them as a strategic bet on emerging markets amid the Fed’s anticipated rate cuts.