Monday, August 9, 2010

Investing Options In Indonesia: Asia's Best Peforming Index

Asia is home to several emerging and globalizing powers, including India and China but one nation that stands out but is not largely covered in the business media is Indonesia. Little is known about Indonesia in the investing circles despite being a country made up of some 17,000 islands, which is now the 4th most populous nation in the world. One striking feature that highlights Indonesia's growth in recent years is the fact that the country has managed to avoid recession during the global downturn, unlike some of its more export-reliant neighbors. Over the last decade, Indonesia has emerged as a vibrant and plural democracy. Its economy is buoyant and a new sense of confidence is evident both within its political leadership as well as its growing civil society. Indonesia is the largest Muslim country in the world, but the Islam practiced by the vast majority of its people is liberal, tolerant and accommodative.

  • The International Monetary Fund (IMF) projects Indonesia’s economy will expand 6% this year. The Chairman of Indonesia’s Investment Coordinating Board estimates growth of between 6% to 7%.

  • The nation’s shares have climbed 12 percent this year and are Asia’s best performers barring Mongolia and Bangladesh, as foreign funds increased purchases after the central bank raised its growth forecast and Standard & Poor’s upgraded the nation’s sovereign debt ratings.

  • Foreign investors moved more funds to Indonesian stocks in March, buying a net 4.92 trillion rupiah ($543 million) of shares after selling 1.58 trillion rupiah in the first two months this year, according to data from the Jakarta stock exchange.

  • The Indonesian rupiah has risen 3.6 percent this year, the second-best-performing currency in Asia, according to data compiled by Bloomberg. A strong rupiah and low inflation have helped the central bank keep its key interest rate at a record low of 6.5 percent to support Southeast Asia’s biggest economy.

  • Indonesia's stock market index, the Jakarta Composite Index, broke its record high earlier this week as it reached 3013.40 points bringing its total gains this year to 19 %, the most among Asia’s 10 largest markets.

Indonesia has managed to avoid recession during the global downturn, unlike some of its more export-reliant neighbors. Both Singapore and Hong Kong are in recession and Malaysia and Thailand are likely slipping into a recession, too, analysts say.

ETFs Investing In Indonesia:

1: The Market Vectors Indonesia (IDX) Fund: The Index provides exposure to publicly traded companies that are domiciled and primarily listed in Indonesia, or that generate at least 50% of their revenues in Indonesia. The fund has more than doubled since its launch, outpacing the S&P 500 and outperforming BRIC countries. IDX consists of the 28 securities included in the Market Vectors Indonesia Index, a benchmark that tracks the performance of companies that are based in or generate at least half of their revenues from Indonesia. IDX charges an expense ratio of 0.71%. The IDX is much more focused on Energy and Commodities that are rallying globally as the US Dollar falls and inflation signals begin to sound.

IDX Top Ten Holdings

1. PT Astra International TBK: 8.80%
2. PT Bank Central Asia TBK: 6.80%
3. P.T. Telekomunikasi Indonesia Tbk. ADR (TLK): 6.75%
4. PT Bank Rakyat Indonesia TBK: 6.06%
5. PT Perusahaan Gas Negara (Persero) TBK: 5.72%
6. PT Bumi Resources TBK: 5.57%
7. PT Bank Mandiri (Persero) TBK: 5.57%
8. Adaro Energy Tbk: 4.82%
9. PT Indocement Tunggal Prakarsa TBK: 4.72%
10. PT United Tractors TBK: 4.66%

% Assets In Top 10: 59.46%
Total Holdings: 29
Issuer: Van Eck
Expense Ratio: 0.68%

IDX Sector Breakdown
Sector Percentage
Financials 25.23%
Industrial Materials 20.03%
Consumer Goods 14.71%
Energy 13.72%
Consumer Services 8.80%
Telecom 8.79%
Utilities 5.72%
Health Care 1.79%

2: The other fund for investing in Indonesia is a closed-end fund, Aberdeen Indonesia Fund (IF), who's principal investment objective is capital appreciation through investing primarily in equity and debt securities of Indonesian companies. Its secondary objective is current income, which is to be derived primarily from dividends and interest on Indonesian securities.

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