ETFs for Indonesia’s Rising Wealth

ETF Trends

In Asia, Indonesia now touts more billionaires than Japan. The expanding middle class in Indonesia has fueled the value of companies through domestic spending.

“The thing that really stands out is that the money of those that produce something for the middle class has been rising while those that made money mostly from commodities went down” in ranking, Justin Doebele, chief editorial adviser of Forbes Indonesia, said in a recent report.

The recent slowdown in the commodity market has been defeated by spending on retail, entertainment, tobacco, food and banking companies in Indonesia. Topping the ranks were R. Budi and Michael Hartono, worth $15 billion thanks largely to their holdings in Bank Central Asia. Also in the top five was Anthony Salim and family ($5.2 billion), who are behind the world’s largest instant noodle company, Indofood, reports Eric Bellman for The WSJ. [Best Emerging Market ETFs]

Coal companies seemed to go down under the radar, as many took hits on asset values. This proves that family assets and capital are neatly protected in this island chain and can withstand the global slowdown while maintaining a domestic marketplace that is rich in more than one way.

GDP in Indonesia is expected to top out at more than 6% in 2012, and do a similar or better performance next year. [Indonesia ETFs Build Momentum on Economy, Technicals]

Keep in mind that Indonesia’s billionaires club is still smaller than the ranks in China, with more than 100 billionaires and India with more than 50 billionaires. However, Indonesia has less than one-fourth the population of China and India, but it has more billionaires per capita.

The following ETF generates more than 50% of revenues in Indonesia. Market Vectors Indonesia Index ETF (IDX) is up 0.74% year-to-date and has $413.4 million in assets under management. IDX tracks the financial sector and basic materials sector heavily.

The Market Vectors Indonesia Small-Cap ETF (IDXJ) has a 13-week return of 2.48% and $2.3 million in asset under management. The fund is relatively new, with less than one year trading. A small-cap play is smart during times of rapid growth. Another fund is the iShares MSCI Indonesia Investable Market Index Fund (EIDO) up 2.22% year-to-date and with $370 million in assets under management. About 99% of revenue is generated in Indonesia, with the financial sector, consumer staples and basic materials top allocations.

Market Vectors Indonesia Index ETF

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Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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