Indonesia was a frontier market that was on the radar of many an investor – until the markets melted down. In 2009, Indonesia and its related exchange traded fund (ETF) climbed its way back and delivered stellar numbers. How did they do it?
The CLSA Asia Pacific Markets have compiled a report that outlines what factors are making Indonesia once again attractive to investors. Important points include:
- Indonesia is a marginal supplier of natural resources to China and India, two of the world’s fastest-growing economies. [Other emerging economies doing well as of late.]
- The country has a young population and about 22 million more people are projected to join the workforce in the next decade. The GDP per-capita growth in recent years has been strong.
- Indonesia is the world’s largest exporter of palm oil and will profit greatly when the demand for palm oil from China and India doubles by 2014.
- Indonesia is the largest exporter of thermal-coal exporter and China is the world’s largest importer of this type of coal.
For now, Indonesia is not interested in a free trade agreement with Asia or Southeast Asian nations, explains Carl Delfeld for ETF Xray. However, a move should be made, as the Jakarta government is aware that the textile and steel industries are under pressure and could collapse, since they’re not equipped to compete with the Chinese markets. [Is Indonesia an emerging market leader?]
Under the free trade agreement between China and the Association of Southeast Asian Nations, Indonesia is required to remove import duties on 6,682 Chinese products. [More reasons the country is thriving amidst the recovery.]
For more stories about Indonesia, visit our Indonesia category.
- Market Vectors Indonesia ETF (NYSEArca: IDX): up 165.1% since inception
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.