Getting alternate market exposure abroad is an option for investors looking for other avenues of growth as the U.S. stock market continues to show heavy volatility. One region to consider is Southeast Asia.

Indonesia, Southeast Asia’s largest economy, has been helped by the rising commodity prices globally, particularly in coal, nickel, and palm oil. Indonesia’s economy grew by 5.01% during the first quarter of 2022. Analysts polled by Reuters were expecting a 5% rise in Indonesia’s economy in Q1.

As a result of higher commodity prices, Indonesia experienced a trade surplus of record proportions. Also, lifted COVID-19 restrictions could mean the economy might keep humming through the rest of 2022.

“Household consumption has improved, even for tertiary spending such as travels,” says Margo Yuwono, head of Indonesia’s statistics bureau, in a CNBC report.

Of course, in any market, there are still potential headwinds. Southeast Asia isn’t immune to rising global inflation and the market doldrums the U.S. is experiencing could eventually hit emerging market (EM) economies.

“Several global risks that will affect the national economic recovery include geopolitical risks, China’s economic slowdown and rising global inflation that has prompted a tightening of global monetary policy,” Josua Pardede, an economist at Bank Permata, says.

Targeted Southeast Asia Exposure

Still, investors can add a dose of diversification to the region with Southeast Asian equities. One place to get targeted exposure via the convenience of an exchange traded fund (ETF) wrapper is the Global X FTSE Southeast Asia ETF (ASEA).

ASEA seeks to provide investment results that correspond generally to the price and yield performance of the FTSE/ASEAN 40 Index. The underlying index tracks the equity performance of the 40 largest and most liquid companies in the Association of Southeast Asian Nations (ASEAN) regions: Singapore, Malaysia, Indonesia, Thailand, and the Philippines.

The rise in commodities, as mentioned by the Reuters report, is focused on Indonesia and Malaysia. ASEA effectively gives exposure to this pair of countries as a way to play the inflation in commodities.

ASEA fund highlights:

  • Efficient access: Efficient access to a broad basket of Southeast Asian securities.
  • Targeted exposure: The fund targets exposure to a specific region.

 

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