Indonesian country-specific exchange traded funds have been a bright spot in the global markets.
Year-to-date, the iShares MSCI Indonesia ETF (NYSEArca: EIDO) increased 9.7% and the VanEck Vectors Indonesia Index ETF (NYSEArca: IDX) advanced 11.3%.
The benchmark MSCI Indonesia Index has gained about 12% in U.S. dollar terms so far this year ended Thursday, compared to the 14% decline for the benchmark compiler’s broader emerging-markets index, the Wall Street Journal reports.
Global investors have also taken notice of the outperformance. Flows from foreign institutional investors into the Southeast Asian equity market hit $5 billion for January through April, according to Goldman Sachs data. The foreign inflows were almost double the full-year total in 2021 and were a stark contrast to the outflows across emerging Asia to the tune of $47.8 billion.
Investors around the world have turned risk-off in face of several challenges, including the Russia-Ukraine war, surging inflation, lockdowns to combat the spared of new COVID-19 infections, and the ongoing shift toward a tightening monetary policy to fight the rising consumer prices.
Herald van der Linde, head of Asia equity strategy at HSBC, noted that the emerging markets that have outperformed also exhibited significant exposure to commodities and banks, and “Indonesia’s got both of them.”
Indonesia is the world’s largest coal exporter and provides other key commodities such as oil, gas, nickel, and palm oil. The emerging Southeast Asian economy has capitalized on rising commodity prices, and investors have jumped into stocks across the mining and materials sector.
Indonesia and other Southeast Asian markets, such as Malaysia, are benefiting from “a number of factors that include reopening-related optimism in the region as well as support from a deepening base of domestic investors in each country,” Vijay Vaidyanathan, head of global capital markets for Southeast Asia at Morgan Stanley, tells the WSJ.
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