SocGen Short KRW/IDR Trade

"Rationale: Contrasting bond inflow momentum. Short KRW: tactically taking advantage of an outsized KRW rally. Market speculation about a pause or a turnaround in the BoK’s hiking cycle due to a deteriorating local growth outlook has resulted in an indiscriminate rally in all Korean assets. Meanwhile, if the speculation about a recession actually materialises, it would be a negative factor to the Korean won. On a transient basis, foreign bond outflows in Korea may also dilute the downward pressure of foreign equity inflows on the USD/KRW. "

"Long IDR: near-term tailwinds to the balance of payments. Inflows into IndoGBs have gained momentum. We observe green shoots of a “re-allocation” in the longer end after significant outflows since 2020, which leads us to believe that the inflow momentum could persist in the near term. Macro factors, such as lower inflation expectations, and a likely end to Bank Indonesia’s policy tightening, bodes well for IndoGB’s performance. The trade surplus will receive further tailwinds from China’s reopening too."