Ishares msci indonesia etf is up 22% ytd and funds are investing, but what are the risks_ – ishares msci indonesia etf (nysearca_eido) _ seeking alpha

The iShares MSCI Indonesia ETF (NYSEARCA: EIDO) seeks to track the investment results of a broad based index composed of Indonesian equities. Msci world healthcare index It has performed quite well this year in line with other high performing ETFs and now has over $600M in assets. Msci stock quote We analyzed this ETF, its overall structure, the quality of the equities in the fund, and the Indonesian economy. Msci world index history With a recent rate increase, we wanted to determine whether there is still upside in 2015 and beyond in this ETF and in the fourth most populated country and largest archipelago in the world.


With an inception date of May 05, 2010, EIDO has an established track record and pays a dividend on a semi-annual basis (June and December). Msci definition It is also one of seven ETFs that currently focuses on Indonesia. Msci world sector weights The ETF has 101 holdings, while the underlying index, the MSCI Indonesia Investable Market Index, or MIMUINON, holds 100 constituents as of October 31, 2014. Msci index china The index is designed to measure the performance of large, mid, and small cap segments of the Indonesian market. Msci wiki The index is reviewed quarterly and rebalanced semi-annually (May and November), and includes 99% of the free float-adjusted market capitalization in Indonesia. Msci world index chart The fund uses a passive management strategy with a sampling approach to achieve its objectives of including 90% of its assets in the securities or depository receipts representing the securities in the underlying index.

We examined the portfolio and found a few surprises in terms of its exposure. Msci world nr In terms of the Market Cap of the fund holdings, it is quite simple: Market Capitalization

While investors may like to think of this ETF as a “Broad Based” ETF, it is as noted primarily large cap in terms of the size of the firms in the ETF and index. Msci emerging markets index constituents Investors who are seeking rapid growth in a company along with an overall economy are encouraged to seek out the Market Vectors Indonesia Small Cap ETF (NYSEARCA: IDXJ). Msci developed markets index Unfortunately, that ETF is quite small with only $7.9M overall, and would be almost entirely dependent on domestic growth and not on global and foreign trade. Msci world onvista As such, we are focusing on this ETF to start at this time.

The interesting aspect here is that while the fund does concentrate on Indonesian equities, it does allows companies domiciled elsewhere to be included in the fund. Msci world zusammensetzung A simple reason would be a dearth of Indonesian firms with adequate market capitalization and market share. Msci world acwi In addition, it would be a mistake to omit companies that have market share and business operations in the country. Msci emerging markets index pakistan Our currency exposure is obviously focused on the rupiah. Msci emerging markets value index Our second largest weighting is actually the US dollar with a total weight of approximately 15.60%. Msci developed This is due to the fact that the HK dollar is pegged to the US dollar. Msci global A strengthening dollar in this case will not produce a drag on the return or yield. Msci world consumer staples index The euro and British pound exposure is extremely limited and would not be a cause of concern in spite of weakening currencies versus the rupiah or dollar.

In terms of overall sector exposures, we were able to source the index weightings, MIMUINON, and compared it to the ETF weightings. Ipd msci EIDO Sector

No real surprises here in the comparison or weighting versus the index. Msci world index historische kurse We expected a large financial weighting and found almost 40% of the ETF in the financial sector with a good blend of consumer, telecommunications and assorted industries making up the majority of the ETF. Msci emerging index Another source that we use for sector and industry analysis, xtf.com, comes up with a slightly different methodology as follows:

As noted, this source comes up with only 29.80% in Financials and 7.00% in Real Estate, giving a lighter weight to the sector overall. Msci benchmark Within a few years all funds will most likely adopt this methodology and “carve out” real estate as well. Msci eafe ticker This methodology is confirmed on our industry breakdown. Msci world index country weights EIDO Industry

This is quite interesting. Msci world kurs What needs to be defined further is what exactly other is. What does msci mean In our other articles, we defined this as MLP (Master Limited Partnership) structure and various other non-equity structures. Msci canada etf Here it would be various other industries that in aggregate are termed “other.” Examples would be Multiline retail, Metals and Mining, Pharmaceuticals, Insurance, Paper and Forest Products, Health Care Providers and Services, etc.

We broke down the top 15 components into ticker symbol and weights to determine the general strength of the major holdings. Msci world index chart bloomberg We attempted to ascertain credit ratings as well, but data was not accurate and could not be confirmed at this time. Msci barra indices Name

The top 15 components represent 69.4214% of the ETF, while the remaining 86 total 30.5268%. Msci world returns Obviously, the fund has a heavy concentration on these issues with financials totally 27.9507% or over 40% of the top 15. Msci world index graph One thing always to consider is that financial services usually benefit (in general) when an economy improves and of course companies such as Unilever, a consumer products company, benefit as well. Msci global index monitor In order to ascertain whether there is further upside in the ETF, it is important to review the economy in brief and determine its future outlook.

While reviewing the Indonesian economy, our analysis showed that though GDP at 5.20% in the first half of the year was the slowest since 2009, many economists expect a further strengthening into 2015. Msci news Most recently, on November 11, the central bank increased its benchmark interest rate by 25 bases to 7.75%, according to the Wall Street Journal

the Indonesian rupiah has remained weak, pressured by investor concerns about the country’s current-account deficit, which makes Indonesia reliant on short-term foreign funding for its bond and stock markets.

The move by the central bank was a sign, according to the Journal, that “the central bank is willing to slow the economy further to ensure the current-account deficit comes down and foreign investors keep their money in the country.”

These moves which are said to be producing the highest lending rates in SE Asia will obviously hurt small businesses. Msci germany etf The Journal article cited lending rates at between 11% to 13% and some small businesses paying upwards of 20% in annual lending costs. Msci world rendite The Asian Development Bank, or ADB, report on the Indonesian economy cited that the policies to restrain domestic demand and to rein in inflation and the current-account deficit have kept the economy subdued this year. Db x trackers msci world index ucits etf 1c Our analysis is that the central bank may tighten again in the new year, but growth should continue and we concur with the GDP figures provided by the ADB. Msci international They expect GDP to come in at 5.80%, down from the previous estimate of 6.0%, and inflation to move higher to 6.90%, up from a previous estimate of 4.80%. Msci world momentum index Their current account balance as a share of GDP is forecast to be -2.50% versus a previous forecast of -2.00%. Msci inc careers Obviously, with the high inflation figure due to primarily a cut in fuel subsidies in 2014, we expect the central bank as stated to be slightly heavy handed here. Db x trackers msci world index Our expectation is that the current account deficit will narrow further and inflation will subside. Msci nordic index Also, with the fuel subsidies decreased, the government budget should be free to spend on other infrastructure and social development projects. Msci world country weights This is also the opinion that is expressed by ADB. Msci eafe growth index Overall, we like the prospects of large companies in the archipelago, but it is unfortunate that many small to mid-sized companies have difficulty expanding. Msci world value This is primarily due to conservative balance management and a lack of financial market depth, according to recent report by S&P and reported in the Jakarta Post. Msci world consumer discretionary index While we do like the fact that the companies are conservative and primarily investment grade, it is unfortunate that they do not have access to additional capital for growth and development. What is msci index Many companies simply prefer to grow organically as well. Msci performance index Cultural reasons and lack of depth in the financial markets are key reasons for this also. Msci europe nr This fact gives an increased advantage to capital rich Chinese, Australian, and other large firms to take advantage of growth in the country going forward. Msci india index The article cited the fact that consumer products and small capital goods will see high competition going forward from larger firms. Msci world index ticker In terms of credit ratings, while S&P rates Indonesia credit BB+, Moody’s rates the country an investment grade rating of Baa3.

In terms of the ETF, with an expense ratio of .61% this is in line with the asset class median of .58%. Msci website The turnover of this ETF is very low with only 8.00% versus an asset class median of 19.00%. Msci meaning The Beta is an extremely low -.45, indicating opposite volatility to the S&P 500. Msci emerging markets index ticker Dividends are quite welcome here with a distribution yield of 2.33% and a 30-day SEC yield of 1.29%, and as we mentioned, paid semi annually. Indeks msci Overall, the cumulative total return YTD (December 02) is 22.89% far exceeding the S&P return of 13.98%. Msci world nr usd definition According to the fund manager, the YTD NAV total return is 25.38% as of December 02. Msci usa etf Presently, the tracking error is at 1.25 which is on the high side. Msci world minimum volatility etf This is attributed to the nature of the developing market share spreads along with movements in the underlying index. Msci u s reit index The shares with a year high of $29.83 (July 22, 2014) and a low of $21.55 (December 18, 3013), closed at $27.70 +.07 on December 02.

We would not classify the fund as a defensive investment in terms of a US market correction or diversification strategy. Db x trackers msci world index ucits etf We would look at the ETF as a welcome addition to a balanced and diverse global portfolio. Msci fund It is also a great opportunity to invest in a growing and developing economy, albeit with higher rates, not lower as is the case in the West. Index msci world We expect the Indonesian economy and region to benefit from its continued close relationship with Australia and its growing relationship with China, along with its overall strong domestic growth going forward.

The author wrote this article themselves, and it expresses their own opinions. Msci world gr The author is not receiving compensation for it (other than from Seeking Alpha). Msci world ytd The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Information and data obtained in this article are from the following sources: fidelity.com, ishares.com, WSJ.com, tradingeconomics, com, thejakartapost.com, xtf.com and our own analysis.