The first ETF representing Indonesia has come to market, sponsored by Van Eck Global and trading on the NYSE Arca. What you don’t know about Indonesia could surprise you.
Market Vectors Indonesia ETF (IDX) seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Market Vectors Indonesia Index. Companies included in the index must generate 50% of their revenues in Indonesia, and must be domiciled or listed on an exchange in the country.
The sector weightings in the fund include financials, 34.4%; energy, 15.8% and telecommunications, 12.5%.
- Growing Economy. Indonesia has made a recovery from the crisis facing Southeast Asia in the late 1990s. The economy flourished in 2007, however, keys to maintaining this growth are situated in internal reform and through the help and confidence of domestic and international investors. The country struggles with poverty and unemployment, which is at 9.7%, but the country does have strong industries of tourism and commodities to help grow their industrialization. According to Theodora, the agriculture of Indonesia includes coffee, rice, cocoa, peanuts, poultry, beef and eggs. Real GDP growth has averaged 5.5% in the last five years; in 2007, it topped 6%. This recovery is expected to continue into 2009.
- Political Transformations. In 2005, Indonesia reached a historic peace agreement with armed separatists in Aceh, which led to democratic elections in December 2006. Indonesia continues to face a low-intensity separatist movement in Papua. This Dutch owned country faces terrorism, poverty, and military corruption as their biggest threats, says CIA-World Factbook.
- Oil, Gas and Mineral Wealth. According to a fact sheet from Van Eck, the hydrocarbon sector accounts for 25% of Indonesia’s GDP, and it’s one of the world’s oldest oil producers. Oil production has declined in recent years, though, and the country exited OPEC at the end of 2008. It’s also one of the world’s top 10 mineral producers, and its coal reserves are the third largest in the world.
- Diversified Exports. Their exports include manufactured goods and natural resources. Oil and gas are 20% of exports, down from 50% in the 1980s.
- Huge Population. Its population of 240 million people is the fourth-largest in the world. Private consumption accounts for half of GDP growth, and the huge domestic market is becoming increasingly consumer-oriented.