Investors Flee Indonesian Government Bonds Post Presidential Election

The 2024 presidential and legislative elections have concluded, yet financial markets are now grappling with a wave of negative sentiment. According to Bloomberg's report on Thursday, Mar. 21, global investors have withdrawn more than US$1 billion from Indonesian bonds since the polls closed on Feb. 14. This significant outflow contrasts with neighboring countries like South Korea and India, which have seen foreign capital inflows during the same period.

Analysts attribute this investor unease to campaign promises made by presidential candidates Prabowo Subianto and Gibran Rakabuming, which have sparked concerns over potential budgetary strains. Of particular concern is the pledge for a free lunch program, which investors fear may lead to a widening budget deficit. "They are apprehensive about the prospect of fiscal loosening by the incoming government, particularly the promise of free lunches without specifying the costs," Goldman Sachs strategist Danny Suwanapruti said.

According to the data of the Financial Ministry, tradable local currency government bond ownership by non-residents (excluding central banks and foreign governments) has gradually decreased. On Feb. 25, the day after Indonesia held its presidential and legislative elections, bonds owned by them totaled Rp 841.37 trillion. This figure decreased to Rp 837.10 trillion on Mar. 1 and even further to Rp 818.42 trillion by Mar. 20. This represents a drop of Rp 22.95 trillion, or approximately US$1.46 billion, post-elections.