EM rates: Foreign sentiment towards Indonesia has picked up

Indonesia continued to receive inflows in early June, and the strong auction result on 23 June pushed total foreign holdings of Indonesia government bonds to a record-high IDR 527tn (YTD inflows: c.USD 5.2bn). This is likely driven by reduced positioning risk after benchmark index investors scaled back their overweight positions significantly in the previous two months. 

Meanwhile, the underperformance of other high-yielding countries such as South Africa and Turkey supports flows to Indonesia. For low-yielding countries, sentiment is weak; meanwhile investors continue to reduce their exposure to Thailand due to the weaker THB. Rising uncertainty surrounding Korea's supplementary budget also weakened foreign inflows.