So far in 2017 the Jakarta Composite Index gained 16.44 percent, showing investors have great confidence in Indonesian stocks. However, rather remarkably, foreign investors have still sold more stocks than they bought this year on the Indonesia Stock Exchange (recording a "net sell" of IDR 40,427 billion). Hence, it are domestic investors who are pushing Indonesian stocks to new record highs. These domestic investors control 64 percent of the trading value so far this year.

Domestic investors' appetite for Indonesian stocks can be partly explained by optimistic views of the Indonesian economy, with GDP growth expected to accelerate, household consumption is showing some early signs of a rebound, low inflation, infrastructure development well on its way, and expectations of more government spending in the years ahead. In other words, the fundamentals of the Indonesian economy are strong although the political years 2018 and 2019 are likely to bring new uncertainties to Indonesia.

However, as we approach the year-end, window dressing is also at play here. Window dressing is a strategy that is often used by mutual fund and other portfolio managers to improve the appearance of a fund's performance before presenting it to clients or shareholders.

Indonesian stocks are currently also being pushed higher by optimism on Wall Street where the Dow Jones Industrial Average posted yet another record high overnight, especially on the back of optimism over the long-awaited tax bill. The US House is set to pass US President Donald Trump's tax bill. Meanwhile, rising commodity prices are also a blessing for Indonesian stocks.

Bahas