Indonesia Swaps Finance Minister, Risking Fund Outflows from Thai Stocks
MacroDigital Finance
President Prabowo Subianto's removal of Purbaya Yudhi Sadewa and appointment of Suahasil Nazara as Indonesia's new finance minister may be a warning sign that foreign capital flowing into the Thai stock market in recent months could flow back out. Some institutional investors currently holding Thai stocks are using money moved out of the Indonesian stock market after concerns over fiscal discipline, policy uncertainty, central bank intervention, and a weakening rupiah, choosing Thailand as a more stable market with large-cap stocks, sufficient liquidity, and relatively high dividends. The rise of Suahasil, a technical economist who has worked at the Finance Ministry for a long time, formerly headed the Fiscal Policy Office, and has served as deputy finance minister since 2019, is interpreted as an effort to restore fiscal credibility. If the market believes Indonesia is moving away from excessive populist policies, the risk that had pushed money out of Indonesia will immediately ease, and fund managers may sell some Thai stocks to take money back to buy Indonesian shares, especially those that have risen sharply and have high foreign ownership, including banking, communications, energy, and large-cap stocks used as proxies for ASEAN investment. However, changing just one finance minister is not enough to bring money flowing back immediately, because the final budget direction still depends on President Prabowo and the government's large-scale projects, especially the free school meals program and energy subsidies, which could put pressure on the fiscal position when oil prices rise and the rupiah weakens.
