This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Indonesia Becomes Emerging Markets Hotspot

Stocks in this article: IDX VWO PXR

(Editor's note: TheStreet today named 111 mutual funds and exchange traded funds, or ETFs, winners and runners-up in its first annual awards ceremony. A list of the funds and related articles can be found on the awards page.)

NEW YORK ( TheStreet) -- Van Eck's Market Vectors Indonesia ETF (IDX) debuted a little more than two years ago and, after briefly lagging the standard-bearer Vanguard Emerging Market ETF (VWO) as global stock markets sank, the Indonesia fund has been a homerun for investors. It has surged 270%, twice that of the Vanguard fund.

The Indonesia exchange traded fund, I noted when it was first released, should be more volatile than emerging market ETFs that hold a wider array of securities. Narrower segments, such as countries and industries, rise and fall more steeply. For example, oil-sands stocks are more volatile than Exxon Mobil (XOM) and the Energy Sector SPDR (XLE). And, likewise, an Indonesia ETF will rise and fall at a faster pace than a fund made up of several countries' stocks.

This is good on the way up and bad on the way down. As global markets have rallied in the past two years, it stands to reason that the Indonesia ETF would outperform benchmarks. During the next global market sell-off, Indonesian stocks will likely drop more than broader indices. As opposed to being good or bad, this is more of an attribute that needs to be understood and managed.

More recently, Market Vectors Indonesia jumped 42% last year and is up 4.4% this year. Last year's returns and a favorable risk-reward profile earned New York-based Van Eck's exchange traded fund TheStreet's 2011 Best Fund award in the emerging market ETF category. The runner-up was the PowerShares Emerging Markets Infrastructure ETF (PXR).

The makeup of the fund hasn't changed dramatically since 2009. At that time, Market Vectors Indonesia had 34% in financial stocks versus 29% now. It had 16% in energy, 12% in telecommunications and 11% in materials, and now has 11%, 11% and 12%, respectively.

The fund offers a great lesson on the unpredictability of dividends from exchange traded funds. The trailing yield of the index underlying the fund was 7% two years ago, and no one should expect that sort of payout. Indeed, the dividends from the fund have been surprisingly small. The first dividend in 2009 was 6 cents and, a year later, it was 27 cents, making the yield from the last dividend about 1%. In other words, the yield won't shelter investors from a bear-market storm.

The investment case, as well as risks and rewards for Indonesia, haven't been altered dramatically. Like many emerging economies, Indonesia is resource-rich, a benefit since global demand for commodities is increasing. That raises the prosperity of the country's residents, creating a middle class that leads a better life of improved diets and modern infrastructure. The risks include accelerating inflation and political instability.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,888.10 +83.30 0.47%
S&P 500 2,070.45 -0.20 -0.01%
NASDAQ 4,768.4630 +3.0830 0.06%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs