Foreigners turn net sellers of Indonesian bonds on fiscal fears

[JAKARTA] Global funds have turned net sellers of Indonesian government bonds this year, as lingering fiscal worries weighed on investor sentiment.

Foreign investors sold a net US$187.6 million of sovereign debt as at Nov 17, according to Finance Ministry data compiled by Bloomberg, putting Indonesia on track for its first annual outflow in three years. That compares with net inflows peaking at about US$4.6 billion in late August.

Overseas funds have grown cautious after Purbaya Yudhi Sadewa became finance minister in September, following protests over rising living costs and job shortages. Investors worry he may seek to revise the decades-old budget deficit cap, likely paving the way for higher government spending.

Indonesia is now the only South-east Asian market seeing net foreign bond outflows this year. The rupiah has weakened 3.8 per cent this year, making it Asia’s worst-performing currency, as foreign outflows weighed on sentiment.

“A push to lock in previous gains ahead of further FX slippage, coupled with limited scope for incremental returns in bonds, likely weighed on foreign sentiment,” Radhika Rao, senior economist at DBS Bank, wrote in a note. BLOOMBERG