Walloped by a plunging currency which facilitated a widening current account deficit, exchange traded funds tracking Indonesia tumbled last year.

That story is known and in the past. This year, ETFs focusing Southeast Asia’s largest economy have surged, proving gold can indeed be mined by participating in the “trash to treasure” trade. “So far in 2014, Indonesia is again the top performer in Asia. Part of the reason is that its currency, the rupiah, is up 4.6%, but Jakarta’s stocks have done nicely too, up 15% year-to-date. Some of its beaten-down big-bank stocks are up as much as 30%,” reports Assif Shameen for Barron’s.

Rebounding bank shares are pivotal to the fortunes of the iShares MSCI Indonesia ETF (NYSEArca: EIDO) and the Market Vectors Indonesia Index ETF (NYSEArca: IDX), which have financial services sector weights of 34.6% and 31.5%, respectively. So is Indonesia’ narrowing current account deficit. Importantly, the country actually posted a surplus in the fourth quarter. [Account Surplus ETF Trade is Mixed]

As a percentage of GDP, Indonesia’s current account deficit is -3.3%, better than the deficits seen in Brazil, India, South Africa and Turkey, the countries that, along with Indonesia, comprise the so-called Fragile Five or BIITS group. [BIITS ETFs Still Fragile]

Barron’s notes Citigroup, JPMorgan Chase and Morgan Stanley have all turned bullish on Indonesian equities, which “trade at about 14 times this year’s earnings and 12.3 times next year’s with consensus corporate earnings forecasts of about 11% growth this year and 13.3% next year,” according to the magazine.

Earlier this month, JP Morgan said Indonesia has proven resilient in the face of Federal Reserve tapering. Proving the power of account surpluses in the developing world, Citi research points out that going back to 1995, a basket of emerging markets surplus countries has easily outpaced a basket of account deficit counterparts. [A Bullish View on Asia’s Best ETFs]

Indonesia ETFs showed ample leverage to the country’s improving current account situation last month as the oft-overlooked Market Vectors Indonesia Small-Cap ETF (NYSEArca: IDXJ) posted a gain of almost 14% while EIDO and IDX had an average gain of 12.6% in February. The Indonesia-specific ETFs were three of the nine emerging markets funds to post double-digit gains last month.

Market Vectors Indonesia ETF

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