Indonesia ETFs Climb Back

March 17, 2014

Former emerging-market titan is on the rebound, and so are its related ETFs.

Indonesia4

Chart courtesy of StockCharts.com

  • The three funds (EIDO | B-99), (IDX | C-77) and (IDXJ | F-58) were down 30-31 percent in the last three quarters of 2013.
  • Indonesia's government ran into budget problems in the beginning of 2013. The country had to cut energy subsidies, causing energy and transportation prices to soar, pushing the country's consumer price index CPI higher up with it, and forcing the central bank to intervene.
  • The Indonesian Central Bank raised interest rates nearly 2 percent over five months from 5.75 to 7.50 percent.
  • The rate hike took a toll on equities: Broad-based ETFs fell 30-32 percent in the last three quarters of 2013.
  • The central bank has stabilized interest rates as CPI has begun to recede to more normal levels.
  • The governor of Jakarta, who is widely perceived to be fiscally responsible and business-friendly, is a front-runner in an upcoming election to be the president of the world's fourth-most-populous nation.
  • Should fundamentals continue to improve, the central bank may lower interest rates to bring them closer to their longer-term average, which would provide upward momentum for equities and the ETFs that track them: (EIDO | B-99), (IDX | C-77) and (IDXJ | F-58).

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