Global Funds Begin Returning to Indonesia, Driven by Market Recovery 

Global investors are beginning to return to the Indonesian market following the volatility that occurred earlier this year. 

A significant recovery in several domestic assets, supported by measures from the government and authorities to restore market stability, has begun to draw back investor interest. 

Foreign funds have purchased Indonesian bonds for four consecutive months. The Indonesian Rupiah (IDR) has also strengthened by more than 3.5% from its record low in June, while the stock market is poised to record quarterly foreign capital inflows for the first time in 2026. 

Several fund managers, including Invesco Ltd. and PPM America Inc., have also begun reducing their underweight positions on Indonesian assets. 

The return of investor interest is supported by a series of policies aimed at restoring market confidence.  

President Prabowo Subianto committed to reducing the budget deficit, while regulators launched several measures to address concerns from MSCI Inc. regarding market transparency. 

Monetarily, the newly appointed Governor of Bank Indonesia, Destry Damayanti, signaled a continuation of previously pursued policies. 

However, concerns regarding policy implementation keep investors cautious about rebuilding their exposure. 

Prabowo's agenda, viewed as interventionist, also remains a source of concern. Risks are further elevated by worsening global conditions, with the rekindled US-Iran conflict driving up oil prices and boosting speculation over rate hikes by the Federal Reserve. 

“We need to see continuity in policy implementation and slightly more supportive external conditions before rebuilding a more significant position,” said Yiping Liao, a Singapore-based fund manager at Templeton Global, which manages USD 4.35 billion in assets. 

“I am still quite cautious. For us, what matters most is policy implementation.” 

The impact of the earlier sell-off is still being felt. Although the Jakarta Composite Index (JCI) has jumped 25% from its lowest level in more than five years reached in early June—technically entering a bull market—the benchmark index is still down nearly 23% throughout 2026. 

That decline is the deepest among more than 90 global stock indexes tracked by Bloomberg. The Indonesian Rupiah (IDR) also remains one of Asia’s worst-performing currencies this year. 

Global funds have recorded net purchases of domestic equities amounting to USD 296 million so far this quarter. However, that figure remains small compared with year-to-date outflows approaching USD 4 billion. 

Invesco has “moderately” reduced its underweight position in Indonesian equities as the risk-reward profile improved, said William Yuen, the company's Hong Kong-based investment director. Invesco manages approximately USD 2.4 trillion globally. 

“We will continue to monitor developments on key issues and assess whether further adjustments are needed,” he said. 

The picture in the bond market remains mixed, even though signs of recovery are most visible in that segment. The return of foreign investors was aided by Bank Indonesia's measures to boost the attractiveness of domestic debt securities. 

However, the pace of foreign buying has slowed compared with June, when investors posted inflows of USD 1.3 billion—the largest in about a year. 

“The budget proposal is a step in the right direction, as are the early signals from Damayanti. However, the recent performance of Indonesian spreads shows that the market still harbors doubts about the underlying policy direction of this administration,” said Matthew Graves, portfolio manager at PPM America. 

“The only way to truly close that gap is to prove commitment through action.” 

Kieran Curtis, head of EM local currency debt at London-based Aberdeen Group Plc, remains more skeptical and said his firm is maintaining an underweight position on Indonesian assets. 

“To me, part of the fiscal news is not yet convincing enough. Policy has become less transparent because so much revenue and expenditure are diverted to Danantara, leaving them unreflected in government budget reports,” he said. 

“I also expect pressure on the exchange rate will likely return, at least to some degree.” 

Danantara is a sovereign wealth fund established by Prabowo last year. 

Sell-Off 

Pressure on Indonesian assets began in early 2026, when index provider MSCI warned of a possible downgrade of Indonesia to a frontier market over concerns regarding investors' ability to access the market. 

The warning triggered a massive sell-off, which was exacerbated by fears of a potential sovereign credit rating downgrade, Prabowo’s populist policies, and his efforts to increase government control over the natural resource export sector. 

The situation reversed after Bank Indonesia raised interest rates outside of its scheduled meeting and took steps to support the Indonesian Rupiah (IDR). 

In late June, MSCI postponed its review of the Indonesian stock market. The index provider said it needed more time to assess the effectiveness of the announced transparency reforms. 

PT UOB Asset Management Indonesia has now taken a neutral stance on equities, said Chief Investment Officer Albert Budiman.

Meanwhile, Allianz Global Investors has “rebuilt a tactical overweight position” in short-term government bonds and theIndonesian Rupiah (IDR), according to Ze Yi Ang, senior portfolio manager at the firm. However, he added that “policy continuity remains a key risk.” 

Demanding Proof 

Overall, investors are awaiting proof of a sustained shift toward more consistent, constructive, and predictable policies before significantly increasing their exposure once again. 

While Prabowo did not announce new populist policies in his budget speech last month, he stated that Indonesia would establish a new commodity exchange to increase its influence over global prices. 

The plan reminded investors of the government’s tendency to intervene in the market, which remains a source of concern. 

In addition to policy credibility, investors are awaiting the outcome of MSCI’s review in November and the direction of the Fed's interest rate policy before determining their exposure to Indonesian assets toward the end of the year. 

“Unfortunately, in recent years, we have seen policy move back and forth,” said Natalia Gurushina, chief economist for emerging markets at New York-based VanEck Associates. 

“That is why some investors are rightly saying: ‘We’ve seen this situation before. Show us the proof.’” 

Source: Bloomberg Technoz 

Indonesia simplifies foreign workers permits to five days 

The Indonesian government is simplifying the licensing process for foreign workers to a maximum of five days by integrating the Online Single Submission (OSS) system as a single point of entry. 

 
This integration allows businesses to access foreign worker licensing services through a single system, eliminating the need for separate processes across different ministerial systems. 

 
Minister of Investment and Downstream Rosan Perkasa Roeslani said the streamlined system gives investors greater certainty over the processing time for the foreign worker permits needed to support investment activities in Indonesia. 

 
"The permit will take approximately four to five days, in accordance with Government Regulation Number 28 of 2025. Once the process is completed (five days), the permit will be automatically issued," he said in a press conference on Wednesday. 

 
Rosan said the implementation of the service integration is planned to begin at the end of September 2026. 

 
The system simplification was agreed upon through the signing of two Joint Decrees (SKB) by Minister of Manpower Yassierli, Minister of Immigration and Corrections Agus Andrianto, and Minister of Investment and Downstream Rosan Perkasa Roeslani. 

The two Joint Decrees regulate the integration of the OSS System, SIAPkerja, and the All Indonesia Application, as well as the establishment of an Integration Technical Team, connecting the OSS system at the Ministry of Investment and Downstream. 

 
Rosan believes that streamlining the licensing process could attract more foreign direct investment (FDI). 

 
He said demand for foreign workers remains high in several industrial sectors in Indonesia, with their presence expected to facilitate the transfer of knowledge and technology to Indonesian workers. 

 
Meanwhile, Minister of Manpower Yassierli said the integration of OSS services reflected a collaboration between three ministries to improve public services while supporting national investment growth. 

 
Data integration is also expected to help the government in monitoring ongoing investments, including investment projections and the distribution of permits for the Utilization of Foreign Workers (RPTKA). 

 
He noted the system integration does not affect the authority of each ministry, which will continue to carry out its respective duties and functions in accordance with prevailing regulations. 

Source: ANTARA News 

Indonesia Plans USD 600 Million to Open Bank Accounts for 200 Million People 

Indonesia is preparing about IDR 11 trillion (USD600 million) to provide initial deposits for bank accounts for more than 200 million people, Chief Economic Affairs Minister Airlangga Hartarto said Wednesday. 

Each new account would receive Rp 50,000, as part of President Prabowo Subianto's drive to ensure every Indonesian has access to formal banking services. 

"The funds will come from the state budget. For 200 million people, it would be roughly $600 million, or around Rp 11 trillion," Airlangga told reporters at the Presidential Palace complex in Jakarta. 

He said it had yet to be determined whether the funding would come from the 2026 state budget or be allocated under the 2027 budget. The funding and implementation mechanism are still being discussed with Bank Indonesia and the Financial Services Authority, or OJK. 

"We will prepare it in the near future. We will discuss the rollout with Bank Indonesia and OJK," he said. 

The account-opening program will be rolled out gradually, with an initial launch targeted before the end of 2026. The plan follows Prabowo's directive, issued during a limited meeting at the Presidential Palace on Monday, to ensure every Indonesian citizen has a bank account.  

"The initiative is intended to strengthen financial inclusion and literacy." Airlangga said state-owned lenders, particularly Bank Rakyat Indonesia (BRI) and Bank Syariah Indonesia (BSI), were being considered to provide accounts for people who do not currently have one. 

Officials are also considering synchronizing banking records with population data maintained by the Home Ministry's Directorate General of Population and Civil Registration, known as Dukcapil. 

According to a survey conducted by OJK and Statistics Indonesia (BPS), Indonesia's financial inclusion rate currently stands at 93.62%, while financial literacy is at 63.57%. 

Airlangga said the figures were relatively strong compared with those of other members of the Organisation for Economic Co-operation and Development (OECD), but there was still room to expand access to formal financial services. 

The mass account-opening program is expected to bring more people into the formal banking system and further increase Indonesia's financial inclusion rate. 

Source: Jakarta Globe