Mid Year Macro Letter 2025
Simpan Macro Letter 2H 2025: Key insights on Indonesia’s economy, bond and equity markets, and US resilience shaping the months ahead.
Hi,
We’re pleased to share our Semi-Annual Macro Letter, offering our view on global and Indonesian markets for the second half of 2025. This edition covers fiscal policy shifts, bond market dynamics, foreign flows, and US economic trends. These are the key factors we believe will shape investment decisions ahead.
Indonesia's Economic Conundrum: Government Spending, Where Is It?
Indonesia enters 2H 2025 with slow fiscal momentum despite subdued inflation and modest growth. A June spending surge stemmed from delayed subsidies and stimulus rollout, yet key programs like the Free Meal initiative met just 4% of targets, prompting budget cuts. Revenue shortfalls followed a cancelled VAT hike and SOE dividend transfers to Danantara, the new sovereign wealth fund. If deployed efficiently, Danantara could be a catalyst for strategic, long-term growth.
Bond Market Resilience Driven by BI Intervention
Indonesia’s bond market stayed resilient in 1H 2025, supported by Bank Indonesia’s heavy bond purchases (IDR 145T YTD), liquidity injections, and SRBI issuance. While this anchored yields and stability, it also dampened price discovery and auction demand, prompting investors to shift toward higher-yielding corporate bonds, especially SOEs and banks. With monetary easing likely amid low inflation and modest growth, we see better value in corporates over sovereigns for 2H 2025.
Foreign Outflows and Domestic Resilience in Indonesia's Equity Market
In 1H 2025, Indonesia’s equity market saw over USD 3B in foreign outflows amid policy uncertainty, fiscal cuts, and social unrest, weighing on large caps. Domestic institutions like Danantara and BPJS, along with corporate buybacks and retail flows, stepped in to support prices, with momentum shifting toward small- and mid-caps. With foreign ownership at multi-year lows, market direction is now led by local investors, pending clearer policy signals and global rate stability.
US Exceptionalism Through Crises: Still Standing Strong
The US economy remains a global outperformer despite pandemic aftershocks, trade tariffs, and geopolitical tensions. US assets continue to deliver strong returns even as the DXY has fallen over 10% YTD, a divergence driven by structural advantages like innovation, market depth, and policy credibility. We see no recession ahead, with growth moderating, inflation easing, and substantial monetary easing expected from September, reinforcing the US’s role as a core investment destination.
Read the full report here for the complete insights. Thank you.