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4 Reasons to Watch Indonesia ETFs

NEW YORK ( TheStreet) -- As emerging Asia continues to remain at the forefront of economic growth, Indonesia has positioned itself to become a global economic powerhouse which would likely benefit the Market Vectors Indonesia Index ETF (IDX) and the iShares MSCI Indonesia Investable Market Index Fund (EIDO).

One reason Indonesia is positioned to fare well in the near future is its relationship with China. With its close proximity to the world's second largest economy, Indonesia has bloomed to be China's third largest trading partner which has enabled the nation's GDP to grow and attract foreign investors and is expected to continue to reap these benefits as China continues to grow. In fact, the International Monetary Fund expects Indonesia to grow nearly 7% in the coming year.

Another reason to consider Indonesia is its supply of resources and relative self-sufficiency. The nation of islands is a member of OPEC but doesn't export oil, instead uses its oil production to turn the wheels of its own economy. By doing so, Indonesia shuns itself from the volatility of crude oil and the potential imbalances in supply and demand of the commodity, which could devastate a growing economy. Furthermore, the Asian nation is rich in other resources, which enables it to increase food production as its population becomes wealthier. This helps mitigate the effects of inflation and dependency on other nations.

Indonesia has a young, robust and educated workforce, which often leads to higher productivity and an intangible competitive advantage in the global arena. More than half of the nation's population is under the age of 30 and workers are willing to work for a far lower wage than workers in China, making it ideal for manufacturing and outsourcing.

Lastly, the Indonesia economy is similar to the U.S. economy in that it is self-driven by its own consumers. Nearly 60% of Indonesia's GDP is generated through domestic consumer spending and research indicates that domestic consumption is improving.

At the end of the day, an opportunity seems to exist in the aforementioned Indonesia ETFs and investors could potentially look to Indonesia as the developing world continues to figure out a way to spark their respective economies.
  • Market Vectors Indonesia Index ETF (IDX), which allocates 26.8% of its assets to financials, 20.5% to industrials, 15.5% to consumer goods, 12.6% to energy and 9.2% to telecommunications.
  • iShares MSCI Indonesia Investable Market Index Fund (EIDO), which allocates 29.7% of its assets to financials, 15.4% to industrial materials, 14.3% to consumer services, 13.3% to consumer goods and 11.3% to telecommunications.
  • -- Written by Kevin Grewal in Houston --

    Disclosure: No Positions
    Kevin Grewal is the founder, editor and publisher of ETF Tutor and serves as the editor at , where he focuses on mitigating risk and implementing exit strategies to preserve equity. Additionally, he is the editor at The ETF Institute, which is the only independent organization providing financial professionals with certification, education, and training pertaining to exchange-traded funds (ETFs). Prior to this, Grewal was a quantitative analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds a bachelor's degree from the University of California along with a MBA from the California State University, Fullerton.

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