Will US Recession Drive More Capital Inflow to Indonesia?

The US economic recession has triggered a bullish rally in global stock and bond markets. The US non-manufacturing PMI data, which contracted to Dec 2022 to 49.6, signaled the start of the US economic recession. The data was responded with rising US stock market indices by more than two percent on Friday, while European stock market indices rose by more than one percent.

Samuel Sekuritas estimated that the euphoria in global financial markets was triggered by market players' optimism about the possibility of the Fed cutting interest rates faster due to the recession. "We expect this global euphoria to spread to the domestic bond market. The rupiah may appreciate, and foreign exchange reserves will also increase due to the withdrawal of government debts and foreign capital inflows into the domestic bond market," Lionel Priyadi, Macro Strategist at Samuel Sekuritas, wrote in his research on Monday. Jakarta Composite Index (JCI) closed 0.06 percent higher at 6,688.26 on Monday.