‘Sell Indonesia’ Sweeps Trading Desks as Prabowo Tightens Grip

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(Bloomberg) — Global investors are rapidly losing confidence in Indonesia as the nation’s stocks tumble at the fastest pace worldwide and its currency sinks to all-time lows.

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Just five months after hitting a record high, the benchmark stock index has tumbled 36% to become the worst performer this year among more than 90 global gauges tracked by Bloomberg. The rupiah has weakened more than 7%, while foreign investors have pulled billions of dollars from Indonesian bonds.

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It marks a dramatic turn for a commodities-rich country that had been a staple allocation in many emerging-market portfolios. What’s unnerved investors is the more populist and interventionist agenda that President Prabowo Subianto has been pursuing — and steadily ratcheting up — in a nation long seen as friendly to foreign investors.

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The big trade in Asia “is sell Indonesia,” said George Boubouras, head of research at hedge fund K2 Asset Management, which oversees about $4.3 billion. After decades of investing there, he exited all positions in 2024. 

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“I have zero exposure to Indonesia,” he said. “I won’t give them an opportunity.”

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Since taking office in October 2024, Prabowo has pledged to boost annual growth to 8%, rolled out a nationwide free school meals program, expanded the state’s role in the economy and channeled billions of dollars into sovereign wealth fund Danantara. More recently, his move to take direct control of key commodity exports to curb tax evasion triggered a selloff in exporter stocks.

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For many investors, the departure last year of former Finance Minister Sri Mulyani Indrawati marked a turning point. Widely seen as a guarantor of fiscal discipline, she had reassured markets that Indonesia would maintain the conservative budget management that helped it earn investment-grade credit ratings and attract long-term foreign capital.

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Now, investors are starting to question if those commitments still hold.

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“Domestic political uncertainty is a typical EM risk that global investors tend to react to by staying on the sidelines until predictability re‑emerges,” said Yuxuan Tang, Asia head of rates & foreign-exchange strategy at JPMorgan Private Bank in Hong Kong. “We still advise caution at this stage.”

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The rupiah has become the clearest expression of market anxiety, falling about 14% since Prabowo took office and ranking as Asia’s weakest currency this year.

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It breached a historic 18,000-per-dollar level Thursday, and options markets signal further declines. Traders assign around a 45% chance it falls to 19,000 by December and a 27% probability of a slide to 20,000 one year from now.

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“The core driver behind shorts in Indonesia is the bearish outlook for the rupiah, where investors remain concerned about macro imbalances and policy credibility, particularly on the fiscal side,” said Gary Tan, a portfolio manager at Allspring Global Investments, which oversees about $624 billion. 

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Pressure has spread beyond the currency market.