Exchange traded funds tied to the Indonesian equities markets surged Monday, two days before the presidential election.
The iShares MSCI Indonesia ETF (NYSEArca: EIDO) was up 4.4%, Market Vectors Indonesia Index ETF (NYSEArca: IDX) gained 3.6% and Market Vectors Indonesia Small-Cap ETF (NYSEArca: IDXJ) increased 5.2%. The Indonesian market has been strengthening over the past week, with country-specific ETFs jumping over their 50-day moving average on Monday.
Indonesia’s benchmark Jakarta Stock Exchange Composite Index was hovering around 4,989 Monday, touching a four-week high.
Investors are positioning themselves ahead of the July 9 election, Reuters reports.
While political uncertainty has increased market volatility, some observers point to Indonesia’s positive long-term outlook. Observers are looking for reform, expansion in the country’s infrastructure and a crackdown on corruption.
“Despite the close race between the two leading candidates, it is important to note that both candidates (Joko Widodo and Prabowo Subianto) have very similar agendas,” Dhananjay Phadnis, portfolio manager of Fidelity’s FF Indonesia Fund, said in the Reuters article.
Jakarta Governor Joko Widodo is widely seen as the front-runner and is often painted in a Modi-esque reform-minded light. Prabowo Subianto is a former army general. Indonesian stocks and the aforementioned ETFs have, for much of this year, embraced the idea of Widodo becoming the country’s next leader. [Indonesia Election, ETFs not to be Confused With India]
Indonesia’s market strengthened on speculation investors were position for a Joko Widodo win after a strong finish in the final leaders’ debate over the weekend, the Jakarta Globe reports.
“Jokowi’s record when it comes to corruption seems better compared to Prabowo, so the debate reflected well on him,” Irene Cheung, a strategist at Australia & New Zealand Banking Group, said in the Jakarta Globe article.
Indonesia is south-east Asia’s largest economy and is expected to growth 5.7% this year, according to The Guardian.
iShares MSCI Indonesia ETF
For more information on Indonesia, visit our Indonesia category.
Max Chen contributed to this article.
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