HSBC Eyes Rupiah Bonds Amid Indonesia’s Projected Growth in 2025

JAKARTA, investortrust.id - HSBC, one of the world's largest banking and financial services institutions headquartered in London, projects strong economic growth for Indonesia in 2025, thanks to infrastructure development, export diversification, and domestic consumption.

HSBC also sees rising opportunities for investment in rupiah-denominated bonds as the government maintains fiscal discipline and inflation stays under control, according to James Cheo, Chief Investment Officer for Southeast Asia at HSBC Private Banking and Wealth Management.

Speaking at the "HSBC Media Briefing: Indonesia & Asia (Investment & Economic) Outlook 2025" held in Jakarta on Thursday, January 9, 2025, Cheo emphasized that consistent and sustainable government policies will be a cornerstone of Indonesia’s economic momentum.

“Indonesia’s economy is poised to benefit significantly from ongoing infrastructure investments and the strength of domestic demand,” Cheo stated.

Cheo highlighted promising signs of recovery in Indonesia’s manufacturing sector, as reflected in the Purchasing Managers’ Index (PMI), which tracks manufacturing activity. He also noted that inflation is expected to remain subdued, below the midpoint of Bank Indonesia’s (BI) target range of 2.5%. Meanwhile, prudent fiscal policies are anticipated to provide a solid foundation for sustainable growth.

The government’s fiscal deficit is projected to remain below 3% of gross domestic product (GDP), ensuring fiscal discipline while maintaining critical investments in infrastructure and social welfare programs, he added.

While acknowledging potential challenges from a strong US dollar, Cheo expressed optimism about the Indonesian rupiah due to its attractive yields. HSBC forecasts the USD/IDR exchange rate to reach IDR 16,300 by the end of 2025.

“Despite external pressures, the rupiah remains a compelling investment due to its yield advantage,” Cheo said.

Cheo also predicted significant easing in monetary policy by Bank Indonesia in 2025. He expects the central bank to cut its benchmark interest rate three times, beginning with a 35 basis point (bps) reduction in the first quarter, followed by a 50 bps cut in the second quarter. This would bring the benchmark rate from the current 6% to 5.25% by mid-2025.

“BI’s rate cuts early in the year strengthen our recommendation to increase investment in rupiah bonds, particularly high-quality bonds issued by state-owned enterprises (SOEs),” he concluded.