Contrary to popular belief, not all emerging markets have been
laggards at the ETF level this year. A fair amount have
have actually been pleasant surprises
and those funds with ample exposure to Southeast Asia's largest
economy among that group.
In the first quarter, the iShares MSCI Indonesia Investable
Market Index Fund (NYSE:
) and the Market Vectors Indonesia ETF (NYSE:
) returned 15.1 percent and 12.5 percent, respectively.
The PowerShares DWA Emerging Markets Technical Leaders
) was up 8.8 percent, stellar among diversified emerging markets
ETFs, due in large part to its 14.4 percent allocation to
All those performances pale in comparison to the 25.5 percent
returned by the Market Vectors Indonesia Small-Cap ETF (NYSE:
The good times for Indonesian equities and the aforementioned
ETFs in 2013 may note be over. After closing at a record high on
March 28, the Jakarta Composite Index may continue advancing this
year, perhaps posting a gain of 17 percent, Alvin Pattisahusiwa,
director of investment at Manulife Aset Manajemen Indonesia said
in an interview with Bloomberg
Pattisahusiwa cited gains in consumer-oriented shares as a
catalyst for Indonesian stocks. Indeed, that is
a familiar catalyst because domestic demand
accounts for a significant portion of Indonesian GDP.
Consumer spending accounted for almost 55 percent of the
country's nominal gross domestic product in 2012, Bloomberg
The aforementioned ETFs offer investors ample exposure to
Indonesia's domestic demand story. For example, IDX, the oldest
of the Indonesia-specific ETFs, allocates a combine 27.1 percent
of its weight to consumer staples and discretionary names,
according to Van Eck data
EIDO's combined weight to those sectors is comparable.
Although IDXJ, the lone Indonesia small-cap ETF, is heavily
allocated to banks and industrials, staples do account for 13
percent of that ETF's weight.
In the interview with Bloomberg, Pattisahusiwa did not
identify his stop individual picks among Indonesian stocks, but
his fund's top five holdings as of Feb. 28 were Astra
International, Bank Central Asia, Bank Mandiri, Bank Rakyat
Indonesia and Telekomunikasi Indonesia, Bloomberg reported. That
quintet represents roughly 44 percent of EIDO's weight.
Indonesia, the world's fourth-largest country by population,
is expected to post GDP growth this year of 6.25 percent this
year, up slightly from 6.23 percent in 2012. Amid rising
inflation and slack materials demand, the Jakarta Composite and
the aforementioned ETFs will likely need strong contributions
from discretionary and staples shares to continue to the
Interestingly, Indonesia's domestic consumption accounting for
55 percent is on par with what is seen in Thailand, though below
the 74 percent in the Philippines, according to Bloomberg data.
As is the case with Indonesia, the domestic demand story in the
has often been cited as part of the bull case
for that country's stocks.
More importantly, domestic demand has proven vital to
investors' returns with ETFs. In addition to EIDO, IDX and IDXJ,
the iShares MSCI Thailand Investable Market Index Fund (NYSE:
) and the iShares MSCI Philippines Investable Market Index Fund
) have been juggernauts again this year.
On the other hand, ETFs tracking export-dependent emerging
markets such as the iShares MSCI Brazil Capped Index Fund (NYSE:
) have been laggards.
For more on ETFs, click
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