The impressive economy of Indonesia is not behind the race of ETF investing market. Market Vectors Indonesia Index ETF (IDX) and iShares MSCI Indonesia Investable Market Index Fund (EIDO) are two main Indonesia ETFs offering greater exposures to the Indonesian economy.
The reasons for the appealing economy underlies in factors like being a G-20 member, tourism, growing hydrocarbon industry, educated workforce, self sufficiency in using its crude oil for fuel and a member of OPEC. More than 60% of Indonesia’s GDP is from domestic consumer spending meaning that there is no reliance on foreign trading partners for economic growth.
Market Vectors Indonesia Index ETF (IDX)
The IDX is an important US listed Indonesia ETF, focusing on large cap companies. It has 29 holdings and is accelerating at 46% since last year. It was launched in 2009 and managed by Van Eck Global. It faced obstacles because of the global recession but still offers attraction for investors in this region. The heaviest weightings are 25.2% financials, 20% industrial materials, 14.7% consumer goods. It showed 20.8% gain in 2010 and has an expense ratio of 0.68%. Till last year only two non leveraged ETFs outperformed the IDX, coal (KOL) and preferred stock (PGF).
iShares MSCI Indonesia Investable Market Index Fund (EIDO)
This Indonesia ETF focuses on financials, energy and telecom and has 42 holdings. It is a free float market capitalization weighted index. It is designed to measure the performance of equity securities listed in the Indonesian stock exchange. It is currently holding twice as more securities than IDX. The financials weightings contribute to 28.7% of the fund’s total assets. This is followed by 13.4% of energy and 13.3% of telecom services. It is up by 15.5% since its launch but has a slightly lower expense ratio of 0.65%. The largest holdings are in Astra International, Telekomunikasi and Bank Central Asia.
Despite being an emerging economy, Indonesia remains a third world nation which is suffering from high levels of corruption and political instability. But the economists and investors are still keeping an eye on this fast growing economy. Some even predict it to be the next member of the BRIC (Brazil, Russia, India, China) group which are the major emerging countries.
Indonesian ETFs were amongst the best performing in last year because of being a marginal supplier of natural resources to China and India, largest exporter of palm oil and thermal coal exporter. The IDX has provided exposure to publicly traded companies. The fund has doubled since launch and has outpaced the S&P 500 and BRIC countries. Both IDX and EIDO have nine of the ten same top ten components. They are top heavy with top ten holdings that account for about 60% of total assets. Indonesian ETFs have heavy allocations to financial which is a common characteristic in many emerging market funds. The second largest sector for IDX is materials and that for EIDO is consumer companies. Both have even delivered nearly identical returns since their launch.
