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Bank Indonesia Leaves Rates Unchanged: ETFs in Focus

Indonesia’s Central Bank left its key interest rate unchanged on Thursday, May 18, 2017, amid fears of a rate hike by the U.S. Federal Reserve in June (read: See How ETFs React When Hawks Act Like Doves).


The bank cut its 7-day reverse repurchase rate six times last year by a total of 1.50% in order to induce growth. However, Bank Indonesia left it unchanged at 4.75%, the same level since October 2016.


Moreover, it also kept the floor and ceiling of the overnight inter-bank money market rate unchanged. The deposit facility and lending facility rates were steady at 4.00% and 5.50%, respectively.


The economy grew 5.01% in the first quarter of 2017. Bank Indonesia’s governor, Agus Martowarojo has predicted 5.1% growth in the second quarter of 2017. He also said that if the target growth for the second quarter of 2017 is achieved, the following two quarters could see 5.2% growth.


Consumer prices rose 4.17% year over year. Moreover, trade surplus was steady at $1.24 billion in April 2017. This was mainly due to the fact that market forces reacted equally toward both imports and exports. The drag on oil prices led to lower activity on both sides of trade. Exports fell 10.3% month over month whereas imports fell 10.2% month over month. From a year-over-year perspective, they rose 12.6% and 10.3% respectively.


In the current scenario, let us discuss some ETFs focused on providing exposure to Indonesian equities (see all Broad Emerging Market ETFs here).  


iShares MSCI Indonesia ETF EIDO


This fund is appropriate for investors looking to gain exposure to companies that are based in Indonesia. Thus, it offers a pure play on Indonesia.


It has AUM of $496.96 million and charges a fee of 63 basis points a year. From a sector look, Financials, Consumer Discretionary, and Telecommunication Services are the top three allocations of the fund, with 32.97%, 15.70%, and 14.56% exposure, respectively (as of May 17, 2017). From an individual holdings perspective, Telekomunikasi Indonesia, Bank Central Asia, and Astra International are the top three holdings of the fund, with 12.77%, 12.20%, and 9.87% allocation, respectively (as of May 17, 2017). The fund returned 7.71% in the year-to-date time frame and 19.06% in the past one year (as of May 18, 2017). EIDO currently has a Zacks Rank #3 (Hold) with a High risk outlook.


VanEck Vectors Indonesia Index ETF IDX


This fund seeks to provide a bet on Indonesia by investing in companies based out of the nation or ones who have a great deal of business interest there.


It has AUM of $81.9 million and charges a fee of 58 basis points a year. From a sector look, Financials, Consumer Staples, and Consumer Discretionary, are the top three allocations of the fund, with 26.8%, 18.1%, and 15.1% exposure, respectively (as of April 30, 2017). From an individual holdings perspective, Bank Central Asia, Telekomunikasi Indonesia, and Astra International are the top three holdings of the fund, with 8.64%, 8.61%, and 7.03% allocation, respectively (as of April 30, 2017). The fund returned 7.30% in the year-to-date time frame and 18.96% in the past one year (as of May 18, 2017). IDX currently has a Zacks Rank #3 with a High risk outlook.


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ISHARS-MS INDON (EIDO): ETF Research Reports
 
VANECK-INDONES (IDX): ETF Research Reports
 
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