Macro Strategy: Liquidity in Motion

Stock Code	Last Price	Change	Change %
DSSA	67,000	1,825	2.80%
SMAR	4,320	530	13.98%
INDF	8,775	400	4.78%
RATU	7,725	250	3.34%
PNGO	3,030	220	7.83%
UNVR	1,680	150	9.80%
DSNG	1,385	145	11.69%
PANI	16,150	125	0.78%

Macro Strategy

Liquidity in Motion

Liquidity improves on stronger fiscal disbursement, but lending remains muted; banks expect funding costs to ease gradually.
Despite improved liquidity, banks stay cautious, channeling funds to short-tenor instruments and SBN amid declining SRBI.
Thailand-Cambodia tensions escalate but remain localized; Indonesia appears insulated, with limited risk of financial market spillover.

Liquidity Improves, But No Impact on Intermediary Yet. Recent indicators show continued improvement in system liquidity, although this has not yet led to a significant rebound in loan growth. Liquidity is expected to improve further, supported by seasonally higher fiscal spending in 2H. We highlight five key liquidity developments:

Bank Indonesia’s (BI) open market operations (OMO) outstanding continues to rise, with a clear shift toward shorter-tenor instruments, with reverse repos, term deposits, and deposit facilities, primarily in the shorter 5–7 days range, are seeing higher uptake, as the longer duration SRBI issuances continue to decline with SRBI yield fall further to 5.57%.

IndONIA and the BI Rate continue to remain stable at pre-SRBI level of >40 bps, indicating an improved banking liquidity. Liquidity conditions are generally more favorable when OMO expansion is driven by short-term instruments rather than by SRBI, given its longer maturity. In contrast, during periods of elevated SRBI issuance, the spread typically narrows as banks compete for liquidity, signaling tighter conditions.

June’s money supply data supports the view that increased government spending is helping ease liquidity pressures. Broad Money (M2) growth accelerated to 6.5% y-y in June (vs sub 5% in May), despite further moderation on credit expansion. Central government liabilities, a proxy for the government’s cash position stored at BI, declined, indicating stronger fiscal disbursement in June.

Third-Party Funds (TPF) rose 6.6% y-y, the fastest pace in 2025 so far. Individual savings also rebounded, growing 1.2% y-y in June, bringing cumulative growth for 2Q25 to 0.3% y-y after contractions of -1.1% in 1Q25 and -1.2% in 4Q24.

BI’s latest banking survey also revealed that banks expect further TPF growth in 3Q25, supported by ongoing fiscal momentum. As a result, banks are also anticipating a moderation in the cost of funds (CoF), which has been rising steadily since 3Q22.

Where The Liquidity Goes? Despite improving liquidity, banks remain cautious in extending credit. The latest banking survey shows only a modest year-on-year increase in the Net-Weighted Balance (SBT) for new loan disbursements in 3Q25. When viewed alongside actual loan growth, the SBT has been on a mild downward trend over the past two years, in line with the broader slowdown in credit expansion. The slight improvement in 3Q25 SBT suggests that a strong rebound in lending remains unlikely in the near term.

Banks are expected to maintain a selective approach, especially in disbursing Working Capital, Investment, and MSME loans. This continued prudence likely contributes to the rising outstanding balance of Bank Indonesia’s monetary instruments, in our view. In this context, monitoring the outstanding volume of shorter-tenor BI tools such as Reverse Repos and Term Deposits, could serve as an early indicator of credit growth. A decline in these instruments, provided there is no concurrent surge in SRBI or SBN issuance, may signal that banks are starting to reallocate liquidity toward loan disbursement. YTD banks have been adding IDR261tn worth of SBN, reversal from IDR444tn reduction last year, when the loan growth surged.

Rising Geopolitics Tensions, Closer to Indonesia. Geopolitical rumblings have resurfaced in Southeast Asia, with Thailand and Cambodia once again locked in a long-standing border dispute that has flared intermittently over the years. The renewed tension prompted an intervention from US President Donald Trump, who announced that both nations had agreed to initiate ceasefire talks. He warned that any further hostilities could put their trade agreements with Washington at risk. However, hostilities persist, with both countries continuing to trade fire across the contested border despite the warning.

Given the current trajectory and past experience, we assess the Thailand-Cambodia conflict as a contained and localized affair, with minimal risk of broader regional contagion. Indonesia, in particular, appears well shielded from any spillover. History offers a useful parallel: a similar flare-up between the two nations in early 2011 failed to rattle Indonesian markets. The JCI, INDOGB yield and the rupiah held firm through that episode, with notable market pressure only emerging later in the year, driven not by regional skirmishes but by the European sovereign debt crisis.

Against this backdrop, we view the latest escalation as geopolitically notable but economically marginal. Barring a significant escalation, we see limited to no impact from the current escalation on Indonesia’s financial markets.

Capital Market – Lower Yield Triggered Profit Taking. The 10-year US Treasury yield fell by 4 bps to 4.40%, while the 2-year yield rose 3 bps to 3.91%, reversal from the ongoing bullish steepening in yield curve trend. In Indonesia, the 10-year government bond yield declined slightly by 2 bps to 6.52%, after briefly touched recent low of 6.49% last week. On the currency front, the US Dollar Index weakened 0.81% w-w to 97.68, and despite weaker DXY, IDR slipped 0.15% to IDR16,315. Indonesia’s 5-year CDS spread narrowed by 2 bps to 71 bps, pointing to a modest improvement in perceived sovereign risk. Meanwhile, the JCI rallied 3.1%, supported by the first weekly foreign inflow since mid-June.

Fixed Income Flows - Foreign investors registered a net outflow of IDR0.46tn in government securities over the past week, though MTD inflows reached IDR17.48tn, lifting total foreign holdings to IDR936tn. Local banks remained active buyers, adding IDR49.32tn worth of SBN last week, (MTD IDR112.81tn). Bank Indonesia, excluding repo transactions, recorded net outflows of IDR37.25tn for the week and IDR66.29tnMTD. Mutual funds added IDR1.80tn in the week, while insurance and pension funds collectively contributed IDR0.46tn.

SRBI Flow - Foreign participation in SRBI, continued to decline, with a weekly outflow of IDR12.12tn. On YTD basis, foreign investors have pulled out a total of IDR60.19tn, leaving foreign ownership at IDR155tn, roughly 20% of the total outstanding.

Equity Flow - Foreign investors recorded a net equity inflow of Rp481bn in the 4th week of July, reversing the persistent outflows seen in recent weeks. Despite this modest inflow, MTD and YTD figures remain in deep negative territory at Rp4.1tn and Rp42.9tn, respectively. The JCI responded positively, surging 3.1%, one of its strongest weekly gains in recent months, coinciding with the first net foreign inflow since mid-June. Stocks attracting consistent foreign buying included ASII, TLKM, BBRI, BRIS, and GOTO, while BBCA, BMRI, SSIA, ANTM, and ICBP experienced continued foreign selling.

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