Indonesia’s financial markets are witnessing an intriguing turn of events, as a significant drop in the Jakarta Composite Index (IHSG) has led to an unexpected surge in demand for government bonds. Despite the sharp 6.58% decline in the stock market, investors are showing strong confidence in Indonesia’s economic outlook, particularly through their active participation in the country’s bond auctions.
The Impact of the IHSG Drop
On March 18, 2025, Indonesia’s benchmark stock index, IHSG, plunged by 420.97 points, or 6.58%, triggering a brief trading halt. The dramatic drop in the stock market raised concerns about market volatility, prompting traders and investors to seek alternative investment opportunities. However, while the stock market faced a sharp decline, government bonds have become increasingly attractive to both domestic and foreign investors.
Sri Mulyani, Indonesia’s Minister of Finance, highlighted the remarkable response in the government bond auction, showcasing investor confidence amidst the volatile market conditions. According to Mulyani, despite the significant fluctuations in the stock market, the performance of the government bond (Surat Utang Negara, or SUN) auction on the same day was highly successful. The Ministry of Finance’s regular bond auction, held every Tuesday, proved to be a solid indicator of Indonesia’s financial health and the continued trust in its economic stability.
Bond Auction Surpasses Expectations
In a remarkable demonstration of investor faith, the government had initially set a target of Rp26 trillion for this week’s bond auction. However, the incoming bids far exceeded expectations, reaching an astonishing Rp61.75 trillion—nearly 2.4 times the targeted amount. This surge in demand for SUN underscores the growing appeal of Indonesia’s sovereign debt, even during times of stock market turbulence.
Notably, foreign investors played a crucial role in the auction, with bids totaling Rp13.95 trillion, accounting for about 22.59% of the incoming bids. This strong foreign interest signals a high level of confidence in Indonesia’s economic management and the soundness of its fiscal policies.
Mulyani emphasized that the overwhelming success of the auction was a clear reflection of the market’s trust in the Indonesian government and the country’s 2025 State Budget (APBN 2025). The foreign investment also underscores the attractiveness of Indonesia’s bonds in comparison to other emerging market assets.
Government’s Decision to Award Rp28 Trillion in Bonds
Following the auction, the Ministry of Finance awarded Rp28 trillion in bonds, with Rp5.33 trillion (19.04%) allocated to foreign investors. This decision demonstrates the government’s commitment to maintaining a balanced and sustainable financing approach, as well as its determination to continue strengthening its fiscal position.
The high demand for Indonesia’s government bonds, even in the face of a turbulent stock market, reflects investor confidence in the country’s economic resilience. As Mulyani pointed out, the robust incoming bids are indicative of the strong belief investors have in the government’s ability to manage its finances and economic growth, despite market challenges.
Investor Confidence Remains Strong
Sri Mulyani’s comments further reinforced the idea that investor sentiment remains positive, even as global and domestic markets face uncertainties. The overwhelming response to the government bond auction is a testament to Indonesia’s strong financial foundation and the effective management of the APBN 2025.
For investors, the bond market remains an attractive alternative amid stock market volatility, with government bonds offering relative stability and attractive returns. The fact that both domestic and foreign investors are actively participating in the auctions is a clear signal that Indonesia’s fiscal outlook is considered solid and trustworthy.
A Resilient Market
Despite the sharp drop in the IHSG, Indonesia’s bond market continues to thrive, driven by strong investor confidence. The success of the recent government bond auction is a key indicator that the market sees value in Indonesia’s economic management, particularly its 2025 budget and fiscal policies. With robust foreign participation and high demand for government bonds, Indonesia’s financial outlook remains positive, and investors are demonstrating that they trust the government to navigate current challenges effectively.
As Indonesia continues to experience market fluctuations, its bond market offers a reassuring sign of resilience. For investors seeking stability in uncertain times, Indonesian government bonds present an attractive option with significant long-term potential.
