HSBC bullish on IHSG sentiment is strengthening market optimism as Indonesia’s benchmark stock index continues its upward momentum, even while the rupiah faces renewed pressure. According to HSBC’s latest outlook, the Jakarta Composite Index (IHSG) could climb to 9,700 in 2026, driven by undervalued equities and a rebound in economic growth. This projection comes despite weak foreign inflows into equities, bonds, and foreign direct investment, which are weighing on the local currency.
The contrast between a rising stock market and a weakening rupiah highlights the complex dynamics shaping Indonesia’s financial landscape in 2026.
HSBC Bullish on IHSG Despite Tepid Foreign Inflows
HSBC’s equity strategists remain confident that Indonesian stocks are well positioned within the broader emerging markets recovery. Herald van der Linde, HSBC’s equity strategist, pointed out that IHSG valuations remain attractive compared to regional peers, creating room for further gains as global risk appetite stabilizes.
The index closed last week at 8,936.7, before opening Monday at 8,991.76, reinforcing signals of sustained upward momentum. These levels put the IHSG within striking distance of the psychologically important 9,000 mark, which it has already tested multiple times in recent months.
HSBC argues that Indonesia’s equity market strength is being fueled by expectations of stronger earnings growth, improving domestic demand, and selective sectoral opportunities, particularly in commodities and banking.
Rupiah Under Pressure as Capital Inflows Lag
While equities shine, the currency tells a different story. HSBC economists expect the rupiah to weaken toward Rp17,000 per US dollar by year-end, missing the government’s official budget assumption of Rp16,500/USD.
Economist Pranjul Bhandari noted that Indonesia continues to face insufficient foreign inflows across key channels, including stocks, government bonds, and foreign direct investment. The rupiah recently closed around Rp16,855/USD, and ongoing global uncertainty could intensify pressure in the months ahead.
Key factors influencing the currency include:
- Slower global capital rotation into emerging markets
- Persistent US dollar strength
- Investor caution amid geopolitical tensions
Despite this, HSBC does not see currency weakness as a major obstacle for equity performance in the near term.
Government Sees IHSG Surging Beyond 10,000
Indonesia’s government has taken an even more optimistic stance than HSBC. Finance Minister Purbaya Yudhi Sadewa has publicly stated that the IHSG could surpass 10,000, exceeding official fiscal assumptions.
According to the finance ministry, this outlook is supported by better policy coordination, structural reforms, and improving macroeconomic fundamentals. Authorities believe that aligned fiscal and monetary strategies will strengthen investor confidence and support long-term capital market growth.
This optimism reflects a broader push by policymakers to position Indonesia as a stable investment destination amid global volatility.
Record Highs, Commodity Support, and Bubble Warnings
Recent IHSG rallies have been supported by:
- Stable domestic economic data
- Rising metal and commodity prices
- Strong performance in large-cap stocks
At several points, the index has approached record highs near 9,000, reinforcing bullish sentiment among local investors.
However, analysts at CSIS (Centre for Strategic and International Studies) have issued cautionary notes, warning that rapid gains could increase bubble risks if not backed by solid corporate earnings and productivity growth. They emphasize the need for fundamental strength, not just liquidity-driven rallies.
Political and Social Factors Shaping Market Confidence
Beyond markets, Indonesia’s broader policy agenda also plays a role. Under President Prabowo Subianto, the government has prioritized rice price stabilization and poverty eradication to protect household purchasing power.
These efforts aim to provide a stronger social and economic foundation for sustained market growth, even as challenges such as Jakarta flooding and global geopolitical tensions remain in focus.
Stable domestic conditions are viewed as critical for maintaining investor trust during periods of currency volatility.
What Investors Should Watch in 2026
As HSBC bullish on IHSG projections gain attention, investors should closely monitor:
- Foreign fund flow trends into equities and bonds
- Rupiah movement toward the Rp17,000 level
- Earnings growth consistency across major sectors
- Government policy execution and reform momentum
While risks remain, Indonesia’s equity market continues to stand out within emerging Asia for its growth potential and valuation appeal.
Conclusion
HSBC bullish on IHSG expectations reflect confidence in Indonesia’s equity market resilience, even as the rupiah faces depreciation pressures. With forecasts pointing to 9,700 on the IHSG and government officials eyeing 10,000 and beyond, 2026 could be a defining year for Indonesian markets. The key will be balancing optimism with fundamentals, ensuring that market gains are supported by real economic progress rather than short-term momentum alone.
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