Capital Inflow into Indonesia to Reach Nearly $10 Billion Soon

JAKARTA, KOMPAS.com – Foreign capital is expected to flow back into Indonesia again in the next two months, a senior economist said on Wednesday.

CIMB Niaga chief economist Adrian Panggabean said that the stream of capital inflow is fueled by the enactment of the Job Creation Law, the end of the second partial lockdown in the Indonesian capital of Jakarta, and a better domestic financial market performance.

Adrian said from 2009 to 2019, the foreign capital reached between 30 trillion rupiahs to 140 trillion rupiahs ($2 billion to $9.5 billion) per year into the bond market with an average of about 85 trillion rupiahs ($5.7 billion) annually.

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“It means that if the capital reversal in 2020 reaches 109.5 trillion rupiahs ($7.4 billion), there is a possibility of at least 140 trillion rupiahs, or equivalent to nearly $10 billion in foreign capital flows in the next two months,” said Adrian in a statement on October 28.

“This estimation may seem ambitious but it is based on historical data,” he added.
He said the foreign capital began to flow back to the domestic bond market in October after it flew out of the country in September and August.

“The flow of foreign funds into government bonds until October 22, reached 19.2 trillion rupiahs ($1.3 billion), much better than the outflows of 8.8 trillion rupiahs ($599.6 million) in September and 3.8 trillion rupiahs ($258.8 million) in August,” he said.

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On the domestic capital market, however, foreign funds were still out in October but not as massive as in previous months, he said.

The capital reversal on the stock market until October 23 reached 3.9 trillion rupiahs ($265.6 million), or less than the outflows of 15.6 trillion rupiahs ($1.06 billion) in September and 8.5 trillion rupiahs ($579.5 million) in August.