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Southeast Asia’s largest economy Indonesia has terminated all business partnerships with JPMorgan Chase & Co. (JPM - Free Report) after the firm recommended investors to reduce their portfolio investment exposure to the country. The government stated that the JPMorgan report could hamper Indonesia's financial stability.
JPMorgan downgraded Indonesia from overweight to underweight owing to higher risk premiums for their credit default swaps after the victory of Donald Trump in the U.S. presidential election. Indonesia could suffer on the implementation of Trump’s anti-trade protectionist policies.
The surge in the U.S. dollar on the President-elect’s promise to introduce a burst of stimulus by increasing infrastructure spending package, easing regulations and tax cuts with an aim to accelerate economic growth and create more jobs is not helping the country’s investment case either (read: 7 Inverse/Leveraged ETFs to Buy as Markets Make Way for Trump).
Meanwhile, Indonesia’s economy is also in a tight spot. Indonesia’s reforms and growth plans received a setback with the country’s GDP growing at a slower-than-expected pace. The government has currently estimated growth of about 5% for 2016 and forecasts growth of 5.3% in 2017, much below the target level of 7% (read: What's Behind the Indonesia ETF Slide?).
The Indonesian economy has been grappling with plummeting prices of commodities like palm oil and coal. The outlook for the country improved after Indonesian president, Joko Widodo, popularly known as "Jokowi" took office in October 2014. He introduced a host of economic reforms and increased spending on infrastructure.
In fact, he has been quite vocal about his wish to see interest rates fall further to spur growth. Jokowi targets to get the annual growth rate up to 7% in 2019, i.e. by the end of his term. The central bank has cut the key benchmark rate six times this year, by a total of 150 basis points (bps) to boost growth in a muted inflation environment (read: Should You Buy Indonesia ETFs on Policy Easing Spree?).
However, overall investor sentiment toward Indonesia is still positive, courtesy of its liberalization drive, which eased restrictions on foreign investment in several industries including films, restaurants and health care. Jokowi’s move to deregulate the traditionally protectionist economy should help in accelerating growth and make the Indonesian business environment more conducive to new investments.
Indonesia ETFs in Spotlight
Indonesian ETFs have been losing their grip of late. iShares MSCI Indonesia ETF (EIDO - Free Report) and VanEck Vectors Indonesia Index ETF (IDX - Free Report) have lost more than 8.5% since Trump’s win. Both EIDO and IDX have a Zacks ETF Rank of 3 or ‘Hold’ rating with a High risk outlook (see: all Asia-Pacific Emerging ETFs here).
This is the most popular ETF tracking the Indonesian market with AUM of $479.3 million and average daily volume of more than 941,000 shares. The fund tracks the MSCI Indonesia Investable Market Index, holding 85 securities in its basket while charging 62 bps in annual fees from investors.
The product is somewhat concentrated in both sectors and securities. The top five firms account for more than 45% of the total assets, while, from a sector point of view, financials dominates the fund’s assets with 36.5% share (read: 3 Asia EM Equity ETFs Gaining from Surging Inflows).
This ETF follows the MVIS Indonesia Index, holding a basket of about 41 companies that are based or do most of their business in Indonesia. The product puts about 53.8% of its total assets in the top 10 holdings, suggesting moderate concentration. With respect to sector holdings, financials again takes the largest share at 26.3%, followed by consumer staples (18.4%) and consumer discretionary (13.8%).
The product has amassed $85.6 million in its asset base while it trades in volumes of around 55,000 shares. It charges 58 bps in fees per year from investors.
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Indonesia Cuts Ties with JPMorgan, ETFs in Focus
Southeast Asia’s largest economy Indonesia has terminated all business partnerships with JPMorgan Chase & Co. (JPM - Free Report) after the firm recommended investors to reduce their portfolio investment exposure to the country. The government stated that the JPMorgan report could hamper Indonesia's financial stability.
JPMorgan downgraded Indonesia from overweight to underweight owing to higher risk premiums for their credit default swaps after the victory of Donald Trump in the U.S. presidential election. Indonesia could suffer on the implementation of Trump’s anti-trade protectionist policies.
The surge in the U.S. dollar on the President-elect’s promise to introduce a burst of stimulus by increasing infrastructure spending package, easing regulations and tax cuts with an aim to accelerate economic growth and create more jobs is not helping the country’s investment case either (read: 7 Inverse/Leveraged ETFs to Buy as Markets Make Way for Trump).
Meanwhile, Indonesia’s economy is also in a tight spot. Indonesia’s reforms and growth plans received a setback with the country’s GDP growing at a slower-than-expected pace. The government has currently estimated growth of about 5% for 2016 and forecasts growth of 5.3% in 2017, much below the target level of 7% (read: What's Behind the Indonesia ETF Slide?).
The Indonesian economy has been grappling with plummeting prices of commodities like palm oil and coal. The outlook for the country improved after Indonesian president, Joko Widodo, popularly known as "Jokowi" took office in October 2014. He introduced a host of economic reforms and increased spending on infrastructure.
In fact, he has been quite vocal about his wish to see interest rates fall further to spur growth. Jokowi targets to get the annual growth rate up to 7% in 2019, i.e. by the end of his term. The central bank has cut the key benchmark rate six times this year, by a total of 150 basis points (bps) to boost growth in a muted inflation environment (read: Should You Buy Indonesia ETFs on Policy Easing Spree?).
However, overall investor sentiment toward Indonesia is still positive, courtesy of its liberalization drive, which eased restrictions on foreign investment in several industries including films, restaurants and health care. Jokowi’s move to deregulate the traditionally protectionist economy should help in accelerating growth and make the Indonesian business environment more conducive to new investments.
Indonesia ETFs in Spotlight
Indonesian ETFs have been losing their grip of late. iShares MSCI Indonesia ETF (EIDO - Free Report) and VanEck Vectors Indonesia Index ETF (IDX - Free Report) have lost more than 8.5% since Trump’s win. Both EIDO and IDX have a Zacks ETF Rank of 3 or ‘Hold’ rating with a High risk outlook (see: all Asia-Pacific Emerging ETFs here).
(EIDO - Free Report)
This is the most popular ETF tracking the Indonesian market with AUM of $479.3 million and average daily volume of more than 941,000 shares. The fund tracks the MSCI Indonesia Investable Market Index, holding 85 securities in its basket while charging 62 bps in annual fees from investors.
The product is somewhat concentrated in both sectors and securities. The top five firms account for more than 45% of the total assets, while, from a sector point of view, financials dominates the fund’s assets with 36.5% share (read: 3 Asia EM Equity ETFs Gaining from Surging Inflows).
(IDX - Free Report)
This ETF follows the MVIS Indonesia Index, holding a basket of about 41 companies that are based or do most of their business in Indonesia. The product puts about 53.8% of its total assets in the top 10 holdings, suggesting moderate concentration. With respect to sector holdings, financials again takes the largest share at 26.3%, followed by consumer staples (18.4%) and consumer discretionary (13.8%).
The product has amassed $85.6 million in its asset base while it trades in volumes of around 55,000 shares. It charges 58 bps in fees per year from investors.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>