Indonesian Equities Near Historical Lows: A Generational Entry Point
Indonesian equities have recently become poorly regarded, but therein arguably lies their potential. Worries over energy and geopolitical strain have caused the market to collapse, pushing valuations towards crisis levels even though the country’s long-term narrative continues to gain traction. If these macroeconomic factors cease to be a concern, the current valuation could offer a rare opportunity to invest in a major emerging market as it approaches a strong inflection point.
There are very few emerging countries in the world that have a few key overlaps that are necessary for me to consider investing in them. They must have free markets, domestic economic liberty, growing demographics, and access to nearby large capital markets. Enter Indonesia, tracked with the IDX Composite Index (JKSE), or my favorite tool for the trade, the iShares MSCI Indonesia ETF (EIDO), which fits all of those categories. Moreover, they are incredibly unloved by the market right now, down nearly 20% YTD, as the looming oil crisis caused by the U.S.-Iran War has obliterated faith in their market. We have a near-perfect setup for a medium-term bottom in Indonesian stocks.