Emerging markets (EM) may have taken a beating from the Covid-19 pandemic, but investors looking for value plays might look to certain countries to play a rebound. One of them is Indonesia where certain economists are forecasting that a rebound could come by the middle of next year.
“The economic recovery really relies on how immediate the discovery of the COVID-19 vaccine is. If it can be reached on time, Indonesia’s economy will rebound in mid-2021,” Iman Sugema, senior economist at the Institute for Development of Economics and Finance.
Covid-19 will continue to be the wild card in the markets, but if a reliable and proven vaccine emerges from the economic wreckage, the tide could certainly turn for Indonesia and EM in general. If not, more uncertainty will remain.
“If the handling of this COVID-19 pandemic gets protracted, more companies will encounter difficulties, and the economic recovery process will also become more challenging,” he noted.
Exchange-traded fund (ETF) investors sensing an opportunity can look at the VanEck Vectors Indonesia Index ETF (IDX ). IDX seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MVIS® Indonesia Index.
The fund normally invests at least 80% of its total assets in securities that comprise the fund’s benchmark index. The index includes securities of Indonesian companies. A company is generally considered to be an Indonesian company if it is incorporated in Indonesia or is incorporated outside of Indonesia but has at least 50% of its revenues/related assets in Indonesia. Such companies may include small- and medium-capitalization companies.
Other Indonesia ETFs to Look At
Other Indonesia-focused funds to look at include the iShares MSCI Indonesia ETF (EIDO ). EIDO seeks to track the investment results of the MSCI Indonesia IMI 25/50 Index.
The fund generally will invest at least 90% of its assets in the component securities of the underlying index and in investments that have economic characteristics that are substantially identical to the component securities of the underlying index. The index is designed to measure the performance of the large-, mid- and small-capitalization segments of the Indonesian equity market.
Investors who want broad exposure to EM can look at funds like the Vanguard FTSE Emerging Markets ETF (VWO ). VWO employs an indexing investment approach designed to track the performance of the FTSE Emerging Markets All Cap China A Inclusion Index. It invests by sampling the index, meaning that it holds a broadly diversified collection of securities that, in the aggregate, approximates the index in terms of key characteristics.
