Hot money continues away from stock market

JAKARTA. Foreign investors continued to withdraw funds from the domestic stock market in the last three months. In November alone, foreign net sell has scored Rp 6.76 trillion. The foreign funds outflow has led the Jakarta Composite Index (JCI) to fall by 4.23% to 5,193.01 in this month.

A number of factors have led foreigners to withdraw their funds from the stock market. First, market participants perform risk aversion after Donald Trump was elected as the US. Second, the ineterest rate rise in the US (the United States of America). Trump’s victory in the US elections has grown uncertainty over The Fed’s plan to increase its interest rate. "Market participants anticipate this by rebalancing the portfolio," said Director of Investa Saran Mandiri Hans Kwee.

Third, market participants consider the performances of listed companies in the country have not yet been maximized. Fourth, the second phase of tax amnesty program is less attractive. The low repatriation funds has also driven the foreign investors to move their capitals.

Analyst at Avere Investama Teguh Hidayat said that during July-August, foreign investors scored Rp24.72 trillion net buy anticipation of a tax amnesty that would repatriate the conglomerates funds. In the September-November period, the value of the net buy was cut in half. "Fundamentally the market has not yet had a reason to go up again," said Teguh, Thursday (17/11).

With conditions like today, Teguh said, the worst case scenario JCI could drop to 4700-4800 at the end of the year. This may happen if foreign funds continue to come out plus the price of coal and CPO back to fluctuation, plus the political situation in the country worsened.

Local investors can actually support the JCI, while foreign investors withdraw their funds. "Local investors could push JCI, but they tend to adopt wait and see stance. They just dare if JCI remains above 5,000," said Teguh.

This year, the domestic stock market recorded significant foreign investments. Since the beginning of 2016 until Thursday (17/11), foreigners still recorded a Rp 25.41 trillion net profits. "Actually, local investors are solid enough to hold the index, but this time a foreign investor comprise 62% of total shares in the market," said Hans.

But, Head of Research at Universal Broker Indonesia Satrio Utomo estimated that JCI will not fall in, as long as foreign capitals outflow remain below US $ 600 billion per day. Net sell rocketed on the last Friday and Monday. But, it eased ahead of the weekend. "In terms of the trend, foreign investors are still in a position to sell," said Satrio.

However, analysts are still optimistic. Analysts estimated that JCI will be closed in the range of 5,100-5,200 at the end of the year. According to Satrio, psychological support of JCI currently exists at the level of 5,000.

(Muhammad Farid/Translator)