The Indonesia ETFs the worst among the emerging markets

2015-06-16 12:11:51

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Since June, 2 the Indonesia equity ETFs have fallen almost 9% below S&P 500, considering their beta values. The largest iShares MSCI Indonesia ETF (EIDO) has declined 8% below S&P in two weeks and 16% in two months:

The majority of the emerging markets ETFs is decreasing, but not so much. The largest iShares MSCI Emerging Markets ETF (EEM) has fallen less than 2% below S&P in two weeks and 7% in two months:

What are the reasons? The expected Fed rate hike has an impact on all of the emerging markets, especially as the cost of capital in these markets is the lowest in a decade. And what are the special reasons for Indonesia's decline?

The value of the Indonesian rupiah is constantly falling and the net capital outflow is amounting to $90 million year-to-date. The domestic demand is plummeting. The imports plunged by 22.3% in April and by 21.4% in May from a year ago. The manufacturing sector is losing competitiveness, despite the falling rupiah. The Indonesian exports dropped in May by 15.2% from a year ago. The Jakarta Stock Exchange Composite Index has dropped by 7.5% year-to-date and the weak rupiah makes the performance of the dollar-denominated ETFs even worse.


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