No Foreigners? Indonesia’s Doing Just Fine

• Foreign interest in Southeast Asian stocks might come back if the dollar starts to cool off and rate cuts begin to materialise. But until then, it’s domestic investors doing the heavy lifting in Indonesia, and so far, they’ve been doing a good job. Foreign money continued to flow out through July, but the market hasn’t reacted too aggressively. To us, that means something is going on, and not looking into it properly might actually cost me my sleep.

Fire Sales, But No Bargain Hunters Yet

• The foreign pullback across the region has slowed a bit. Tariff headlines have calmed, the dollar’s been more stable, and some investors are starting to creep back in. In July, the region saw a small net inflow, around $35 million, but it wasn’t broad-based. Vietnam and Thailand brought in money, while Indonesia, Malaysia, and the Philippines still saw outflows. We don’t necessarily think that’s a long-term trend, more like a breather before things begin to settle.

• August has picked up in a similar fashion. Thailand continues to attract inflows, and Vietnam’s heavy outflow numbers are being overstated because of one thing: block sales. Over $400 million worth of Vingroup shares changed hands, and that’s skewing the data. If you strip that out, it’s not as ugly as it looks.

Locals Keeping the Rally Alive

• Indonesia’s story is pretty fascinating. It’s seen over 60 trillion rupiah in foreign outflows so far this year, already more than what we saw during peak pandemic panic. But the Jakarta Composite Index (JCI) is still up nearly 10% for the year.

• Since bottoming in April, the JCI has climbed steadily and is now just 5% off a new 52-week high. Meanwhile, the LQ45, which tracks the large caps, is flat. That tells you the rally isn’t being driven by a few giants. It’s much broader than that.

• Roughly 42% of listed stocks have outperformed the index, the highest ratio since 2021 and well above the long-term average. The JCI is also sitting above both its 50- and 200-day moving averages, with more than half the stocks doing the same. Which is another sign of a broad-based pick up.

Foreign Grip Loosening

• It’s clear that foreign investors are playing a much smaller role than before. July saw the highest turnover in a year, but foreigners only made up 34% of that, down from 53% last August. According to the latest depository data, foreign ownership in equities dropped to 45%.

• Yes, the value of their holdings is up 7.6% this year, sitting around 3,500 trillion rupiah, but that still trails the broader market. Locals, by comparison, have seen the value of their holdings rise 14.5%. The number of retail investor accounts has now crossed 7 million, more than double what it was three years ago. And most of them are under 40. That’s a big generational shift, and it’s reshaping who really drives the market.

Some Stocks Still Pulling in Foreign Capital

• Even with large outflows, some stocks are still drawing offshore institutional interest. Pension funds have added to Bank Rakyat Indonesia, while mutual funds have trimmed their exposure to names like Bank Mandiri. Bank Syariah Indonesia also saw more foreign pension interest, suggesting a rise in interest in Islamic finance, a topic that we will be exploring in the future.

• Aneka Tambang had decent demand from mutuals, and pensions added a little as well. We also saw new foreign interest in GoTo, Indosat, and Telkom Indonesia. That said, stocks with higher mutual fund ownership may be more sensitive to redemptions if things turn. Pension fund flows tend to be stickier, which makes them a bit more reassuring.

So, What’s Our View at Cordoba?

• We’ve said it before and we’ll say it again, Indonesia’s long-term macro environment remains strong. A growing local investor base, steady economic momentum, and a market that’s learning to stand on its own two feet, that’s not something we’re about to turn bearish on. It fits neatly with what we’ve laid out in When Growth Hits a Wall, where we argued that markets will reward countries with real buffers and credible policy paths.

• That said, we’re still being selective. We’re overweight EM, but our biggest conviction sits with markets where the carry is cleaner and the policy backdrop is clearer, Malaysia on the rates side, plus Brazil and Mexico for local-currency debt where real yields still stack up. That’s in line with what we’ve written in our notes on Malaysia and our EM note on why investors are rotating back into certain local markets.

• For Indonesia, we’re patient rather than aggressive. We like the breadth under the JCI and the strong local bid, but we’d like to see the dollar settle and the easing narrative take shape before we put capital to work. In the meantime, we’re tracking the mix of flows between pensions and mutual funds, watching FX hedging costs, and keeping an eye on where bank balance sheets are leaning, so that when the moment’s right, we can step in while liquidity is still on our side.