Invest In Indonesia: A Guide To Country-Specific Funds

Investing in Indonesian funds can be a great way to diversify your portfolio and tap into the growth potential of Southeast Asia's largest economy. With a population of over 270 million people and a rapidly growing middle class, Indonesia offers a range of investment opportunities across various sectors. The easiest way to invest in the Indonesian stock market is through broad market indices, which can be done at a low cost using Exchange-Traded Funds (ETFs). There are several well-known fund management companies operating in Indonesia, including Fidelity, which offers funds aiming to achieve capital growth over time. In addition, Indonesia's best-performing funds have been recognised through awards such as the APRDI-Bloomberg Indonesia Fund Awards, which celebrate exceptional performance and encourage industry best practices.

Islamic, Thematic, Fixed Income USD Denominated, Index and other funds

Islamic Funds

Islamic finance in Indonesia includes ziswaf (zakat, infaq, sadaqa, waqf), microfinance, banking, capital market, insurance, and more. Notable Islamic funds in Indonesia include Cipta Syariah Equity by PT Ciptadana Asset Management, Mandiri Investa Dana Syariah by PT Mandiri Manajemen Investasi, and SAM Syariah Berimbang by PT Samuel Aset Manajemen.

Thematic Funds

Thematic bonds and Sukuk in Indonesia are aligned with the country's commitment to sustainability and the climate agenda. Notable Thematic funds in Indonesia include Bahana Dana Infrastruktur by PT Bahana TCW Investment Management.

Fixed Income USD Denominated Funds

Fixed Income funds in Indonesia are mutual funds with a larger portion of assets allocated to fixed-income securities, such as bonds. A notable Fixed Income USD Denominated fund in Indonesia is Danamas Dollar by PT Sinarmas Asset Management.

Index Funds

Index funds in Indonesia provide exposure to a broad range of companies and targeted access to Indonesian stocks. A notable Index fund in Indonesia is PG Indeks Bisnis-27 by PT PG Asset Management.

Other Funds

Other types of funds in Indonesia include Money Market Funds, Balanced Funds, Equity Funds, and Capital Protected Funds.

ETFs and the Indonesian stock market

ETFs are a great way to invest in the Indonesian stock market. The easiest way to invest in the Indonesian stock market is to invest in a broad market index, which can be done at low cost by using ETFs.

There are two types of ETFs that provide exposure to the Indonesian stock market:

• Country-specific ETFs: These ETFs invest specifically in Indonesian stocks and provide direct exposure to the Indonesian market. Examples include the iShares MSCI Indonesia ETF and the VanEck Indonesia Index ETF.
• Regional ETFs: These ETFs invest in a broader range of Southeast Asian stocks, including Indonesian stocks. An example is the Global X FTSE Southeast Asia ETF.

When considering which ETF to invest in, it is important to compare the expense ratios, which represent the annual fees associated with the fund. The expense ratio for the iShares MSCI Indonesia ETF is 0.59%, while the VanEck Indonesia Index ETF does not disclose its expense ratio.

Additionally, it is worth noting that there is only one index on the Indonesian stock market that is tracked by ETFs, the MSCI Indonesia index, which is tracked by two ETFs:

• HSBC MSCI Indonesia UCITS ETF USD
• Xtrackers MSCI Indonesia Swap UCITS ETF 1C

These ETFs provide targeted access to Indonesian stocks and allow investors to express a single-country view. The MSCI Indonesia index tracks large and mid-capitalisation Indonesian companies that are available to investors worldwide.

In summary, ETFs are a convenient and low-cost way to gain exposure to the Indonesian stock market. Investors can choose between country-specific ETFs that focus solely on Indonesia and regional ETFs that provide broader exposure to Southeast Asian markets. When selecting an ETF, it is important to consider the expense ratio and the underlying index being tracked.

Investment platforms and brokers

When it comes to investing in Indonesian funds, there are several investment platforms and brokers to consider. Here is an overview of some popular options:

Investment Platforms

• JustETF: This platform offers a comparison tool to help investors find the right investment platform or broker for their needs. It provides information on the cheapest way to trade ETFs (Exchange-Traded Funds), with details on annual total expense ratios and the performance of Indonesian stocks.
• Morningstar: Morningstar is a well-known investment research and analysis platform. It provides in-depth information on various funds, including the Fidelity Funds - Indonesia Fund. Morningstar offers ratings, growth charts, investment objectives, and portfolio insights to help investors make informed decisions.
• Fidelity: Fidelity is an investment management company that offers the Fidelity Funds - Indonesia Fund with the goal of achieving capital growth over time. This fund is based overseas and is not subject to UK sustainable investment labelling and disclosure requirements. Fidelity provides key statistics, investment objectives, and important notices to help investors understand the fund's characteristics.

Brokers

• PT Allianz Global Investors Asset Management Indonesia: One of the many brokers in Indonesia that offers investment management services.
• PT Ashmore Asset Management Indonesia Tbk: Another Indonesian broker providing investment management services.
• PT AXA Investment Managers Select Indonesia: This broker offers investment management services in Indonesia.
• PT Bahana TCW Investment Management: An Indonesian investment management company, offering various financial products and services.

These investment platforms and brokers provide investors with the tools and information needed to invest in Indonesian funds. It is important for investors to conduct their own due diligence and consult with financial advisers before making any investment decisions.

Best-performing funds

In 2014, Bloomberg, in collaboration with the Mutual Funds Association of Indonesia (APRDI), announced the winners of the APRDI-Bloomberg Indonesia Fund Awards. The awards were launched to celebrate and recognise Indonesia's best-performing funds. Over 250 funds were evaluated across five categories: Islamic, Thematic, Fixed Income USD Denominated, Index, and others. Here are the winners in each category:

Best Islamic Fund (Equity): Cipta Syariah Equity by PT Ciptadana Asset Management. This fund offers investors exposure to Islamic equity investments, adhering to religious guidelines while seeking capital growth.

Best Islamic Fund (Fixed Income): Mandiri Investa Dana Syariah by PT Mandiri Manajemen Investasi. This fund focuses on fixed-income investments that comply with Islamic financial principles, providing stable returns with a low risk profile.

Best Islamic Fund (Mixed Allocation): SAM Syariah Berimbang by PT Samuel Aset Manajemen. This fund adopts a balanced approach, investing in a mix of Islamic equity and fixed-income instruments to offer both capital appreciation and stable returns.

Best Thematic Fund: Bahana Dana Infrastruktur by PT Bahana TCW Investment Management. Thematic funds focus on specific themes or sectors, and this particular fund centres on infrastructure investments, aiming to capture the growth potential in Indonesia's developing infrastructure landscape.

Best Fixed Income USD Denominated Fund: Danamas Dollar by PT Sinarmas Asset Management. This fund invests in a portfolio of US Dollar-denominated fixed-income securities, offering stable returns and diversification to investors.

Best Index Fund: PG Indeks Bisnis-27 by PT PG Asset Management. Index funds track a specific market index, and this fund follows the PG Indeks Bisnis-27, capturing the performance of 27 leading Indonesian businesses across various sectors.

Best Equity Fund (AUM <= 100 billion): Pratama Equity by PT Pratama Capital Assets Management. This fund focuses on investing in Indonesian equities with a total asset value of 100 billion or less, offering exposure to companies with high growth potential.

Best Equity Fund (100 < AUM <= 500 billion): Millenium Equity by PT Millenium Danatama Asset Management. This equity fund targets companies with asset values between 100 and 500 billion, aiming to capture the growth potential of larger, more established businesses.

Best Equity Fund (AUM > 500 billion): SAM Indonesian Equity Fund by PT Samuel Aset Manajemen. This fund invests in well-established Indonesian companies with a total asset value exceeding 500 billion, offering investors exposure to some of the nation's leading businesses.

Best Fixed Income Fund in various AUM categories were also awarded, recognising the top funds in managing domestic fixed-income investments.

Additionally, here are some honourable mentions for funds investing in Indonesia, although they may not be based in the country:

• HSBC MSCI Indonesia UCITS ETF USD
• Xtrackers MSCI Indonesia Swap UCITS ETF 1C
• Fidelity Funds - Indonesia Fund Y-Acc-USD

Investment objectives

When considering how to invest in Indonesia, one of the easiest ways to gain exposure to the Indonesian stock market is to invest in a broad market index, which can be done at a low cost using ETFs. ETFs are a good option for investors who want to avoid picking individual stocks. The MSCI Indonesia index tracks large and mid-capitalisation Indonesian companies that are available to investors worldwide.

If you are looking to invest in Indonesian funds, there are a variety of investment objectives to consider. One common objective is to achieve long-term capital growth. For example, the Fidelity Funds Indonesia Fund aims to achieve capital growth over time. This fund is managed by James Trafford, who has demonstrated sufficient knowledge of the Indonesian market.

Another investment objective to consider is investing in Indonesia's best-performing funds. Bloomberg, in collaboration with the Mutual Funds Association of Indonesia (APRDI), recognised Indonesia's top-performing funds in 2014 across various categories, including Islamic, Thematic, Fixed Income USD Denominated, Index, and others.

Additionally, you may want to consider investing in specific sectors or industries within Indonesia. For instance, you could focus on Indonesian companies in the communication services, banking, or technology sectors.

Finally, it is important to keep in mind that investing in Indonesia may come with certain risks and challenges due to the country's specific economic, political, and regulatory environment. Therefore, it is crucial to conduct thorough research and due diligence before making any investment decisions.

Frequently asked questions