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TheStreet Open House

Two ETFs for Betting on Indonesia

Stocks in this article: EIDOIDX

NEW YORK ( TheStreet) -- Market Vectors Indonesia Index ETF (IDX) and iShares MSCI Indonesia Investable Market Index Fund (EIDO) offer investors exposure to Indonesia's impressive economy at a time when high unemployment and slow growth continue to plague more-developed nations.

Indonesia is the fourth most populous country in the world and is a member of the G20. It's also a member of OPEC, but it doesn't export any oil. Instead, it uses its crude to fuel its own economy. This self-sufficiency means that Indonesia is relatively immune to global oil price volatility. The Southeast Asian nation is also rich in other natural resources.

Other factors that make Indonesia appealing include its focus on tourism, its massive hydrocarbon industry and its relatively skilled and educated workforce. That workforce, combined with extremely low labor costs, makes Indonesia an attractive location for manufacturing and outsourcing, particularly as wages rise rapidly in China.

In addition, more than half of Indonesia's population is under 30 years of age, which boosts the productivity of its workforce and means that its economy isn't dealing with the fiscal consequences of an aging population.

Lastly, more than 60% of Indonesia's GDP is from domestic consumer spending, a rarity for a country at its stage of development. That means the nation is not primarily reliant on the prosperity of its trading partners.

Looking ahead, Indonesia's population trends remain favorable, and its GDP is expected to grow around 6% for 2010 and potentially an additional 7% in 2011, according to the International Monetary Fund (IMF).

As I mentioned above, two ways to play Indonesia are:

Market Vectors Indonesia Index ETF, which has 29 holdings and focuses on large-cap companies. IDX is up nearly 46% over the past year and closed at $75.08 on Tuesday.

iShares MSCI Indonesia Investable Market Index Fund, which has 42 holdings and focuses on financials, energy and telecom. EIDO closed at $25.14 on Tuesday.

Although Indonesia's economy appears attractive, investors need to remember that emerging markets have risks, such as corruption and political instability.

A good to way to protect oneself against those risks is to use an exit strategy that identifies specific price points at which downward price pressure is likely.

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