If 10-year Treasury yields continue rising, IDX and EIDO could be vulnerable to more downside. J.P. Morgan “is concerned that Indonesian equity performance, despite a 23% decline from the peak, has not reflected the risk of a structural increase in the country’s risk-free rates or decrease in its growth prospects,” reports Sulli Ren for Barron’s.
The ETFs are vulnerable on another front. Indonesia’s central bank has had to raise interest rates in an effort to support the rupiah. Those higher rates are could crimp loan growth, which is not good for news for EIDO and IDX given the ETFs’ weights of 34.1% and 34% to the financial services sector.
Market Vectors Indonesia ETF
ETF Trends editorial team contributed to this post.