Tuesday, December 22, 2009

Century bailout & capital outflow

Liquidity crunch hit global financial market way before the Century bailout. With or without financial crisis in Indonesia, global fund managers would still withdraw their funds from Indonesian market.
If we look at statistics of stocks trading in September-December 2008, it is clear that foreign funds flown aggressively in the fourth quarter 2008. Even in the third quarter 2008, net buy of foreign investors at Indonesia Stock Exchange (IDX) reached Rp2.26 trillion. It is lower than second quarter (Rp4.8 trillion).
Two weeks trading (before the Century bailout) at IDX resulted in net foreign buy of Rp110 billion (Nov 10-21). There were the so-called capital outflows of Rp289 billion in the first week of November, the second and third week of October (-Rp810 billion and -Rp650 billion respectively). That was mainly due to tight liquidity in some private equity firms.
But the fourth week of October we saw huge inflow of capital into the stock market. The biggest inflow of foreign capital in the stock market was recorded in fourth quarter of 2008 (+Rp11.42 trillion) for simple reason: the stocks have already bottomed out that time.
In fact the biggest inflow of capital in the stock market was recorded in fourth week of October at +Rp5.4 trillion, three weeks before government decided to bailout Century. So, what capital outflow they talked about when discussing Century bailout? How about money market or flow of funds in the banking system that time? Unfortunately, we don't have that. But Bank Indonesia argued foreign reserves dropped substantially that time. (TH/YA)




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