It is no secret that growth in developed markets has remarkably slowed. Investors who are looking for growth markets have no choice but to allocate a portion of their portfolios to emerging markets. However, the previously popular BRIC countries have now become too popular and are over-owned. Therefore, astute investors need to look for less-popular emerging markets. I believe Indonesia deserves consideration.
The big news
The big news is that Indonesia grew faster than expectations in the fourth quarter of 2012. Gross Domestic Product (GDP) grew at 6.1% compared to expectations of about 5.8%.
This is significant because the torrid growth in Indonesia took place during a period when China's economy, having gone from 11% growth to 8%, was slowing. China is a big importer of Indonesian commodities such as copper, palm oil, coal and timber.
While many countries in Asia have suffered because of slower growth in China, the Indonesian economy has continued to march forward. One reason is that nearly 60% of GDP in Indonesia is the result of domestic consumption. The latest GDP data shows that the consumer in Indonesia remains strong.
The best way to invest in Indonesia
In my opinion, the best way to invest in Indonesia is through the Market Vectors Indonesia Index ETF IDX . The ETF contains companies that are either based in Indonesia or derive at least 50% of their revenues from Indonesia. In the long run, IDX is likely to prove to be a better investment than the popular China ETF FXI .
From a technical perspective, the Indonesian market is rangebound.
Please click here for the chart.
The chart shows resistance and support levels. A breakout to the upside in due course is likely, as fundamentals trump technicals.
Our ratings and indicators
ZYX Emerging Market ETF Alert provides ratings on 15 emerging markets in three different time frames, short-term, medium-term and long-term for investors who have different time horizons.
In the medium term, Indonesia remains a strong buy, and in the long term, it remains a buy.
The composite result of our indicators for the short term in 10 different categories is neutral with a positive bias. Here is the breakdown:
Economic Indicators: Positive
Fund Flows: Positive