This place isn’t on most investors’ radars…yet. But that will change soon.
The place I’m talking about is Indonesia.
You’ve heard of the BRIC economies – Brazil, Russia, India and China. These are the “big guns” in the emerging markets world.
Jim O’Neil, a well-known Goldman Sachs analyst came up with the term back in 2001 in a paper titled “The World Needs Better Economic BRICs.” O’Neil’s point: The BRICs would become the world’s four dominant economies by 2050.
Think of Indonesia as the “fifth BRIC.”
Indonesia is slightly smaller than Mexico. Or about three times the size of Texas. The bulk of the population lives on just five major islands: Sumatra, Java (the location of the capital city Jakarta), Sulawesi, Borneo and New Guinea. But the country’s land mass is spread over an archipelago of 17,508 islands, of which about 6,000 are inhabited.
This string of islands is on a strategic location slap bang in the middle of major sea-lanes linking the Indian and Pacific oceans.
With a GDP of $521 billion, its economy is less than half the size of its nearest BRIC cousin. But it’s certainly big enough to invest in. It’s a well-diversified economy with sizable incomes from agriculture, natural resources and manufacturing. It’s also well situated between India and China. This means its exports should grow as these larger neighbors grow.
Indonesia also has a relatively stable government under Susilo Bambang Yudhoyono. And although levels of corruption are still too high for comfort, it is recognized to be less corrupt than BRIC member Russia. In general the trend is for less corruption over time.
According to The Economist, Indonesian GDP will grow by 5.9% next year. That’s almost three times the World Bank’s 2.4% estimate for the developed economies. And nearly three times the 2.5% forecast for the US (which by the way, looks optimistic).
More important, this growth is being driven by the private sector, not by government spending. In Indonesia, the private sector accounts for roughly 90% GDP.
Also, Indonesia is well isolated from the weak economies of the US and Europe. Only 11% of its exports go to the US. The bulk of the other 89% go to Asian nations. This is another reason to have confidence in the country’s future prospects.
There’s more good news on the consumer-spending front, too. Over the past five years, the average income has doubled to $2,350 a year. And a report by Deutsche Bank predicts that figure can rise another 50% by the end of next year.
Despite this income growth, Indonesia still has the lowest unit labor costs in the Asia- Pacific region. This has attracted manufacturing activities from China. Employment growth is critical, because half of Indonesia’s population is 25 years old or younger.
This means the workforce as a portion of total population will rise over the next 20 years. This should further increase the country’s consumption levels and fuel further economic growth.
But before we move on, I want to flag three risks associated with Indonesia.
First, there will be a change of president in 2014. A shift away from the reforming agenda of the current administration would be negative for investments.
Second, if big international investors get spooked by emerging markets, Indonesia could suffer badly. But it’s important to remember that any turning away from the emerging markets usually only lasts for a short time.
A good example of investors getting spooked (big time) is the recent financial crisis following the subprime mortgage meltdown. Between February and November 2008, the MSCI Indonesia Index fell 72%, measured in US dollars.
Of course, the crisis had nothing to do with Indonesia. Investors everywhere were simply panicking and selling indiscriminately. But (and this is a big but) the index then came roaring back. It’s now up 319% from its lows in November 2008. If you’d bought at the pre-crisis peak and held on, you’d still have made 17% on your investment, measured in US dollars.
Serious investors shouldn’t worry too much about this kind of illogical, short-term market volatility. In fact, if this kind of panicked selling happens again, I’d be recommending you invest more into Indonesia (plus a lot of other places).
Third, Indonesia runs along an active fault in the Earth’s crust. There are quite regular earthquakes and volcanic activity. From time to time this activity can produce major natural disasters. The most infamous recent example was the 2004 tsunami, when a huge undersea earthquake off the west coast of Sumatra triggered the massive waves that pounded parts of Thailand and other countries in the region.
However, despite the omnipresent risks of investing in Indonesia, the country’s stock market has been performing brilliantly. The MSCI Indonesia Index has gained 26% a year over the past 10 years, measured in dollars. This investment performance means that the Indonesian stock market has been one of the strongest in the world over the past decade, considerably outperforming all of the BRICs, as well as the loss-making US stock market.
You would have gained 893% if you’d invested in Indonesia over the last 10 years, measured in dollars. In and of itself, that’s a remarkable run…all the more so when compared to the S&P 500’s 15% decline over the same period. Investors looking to capture the upside of the emerging market megatrend, therefore, would do well to look toward the “Fifth BRIC.”
Rob Marstrandfor The Daily Reckoning
Rob Marstrand worked for UBS for 15 years, mainly in corporate strategy, before escaping the banking world and moving to South America. His ex-employer was the largest global wealth manager and world's biggest stock trader. The strategy job involved all areas of the business in all parts of the world. Reviewing current businesses, developing entry strategies for new businesses and countries, and working on acquisitions and joint ventures. This work involved detailed review and valuation of competitors and takeover targets. Rob lived in Hong Kong, China from 2002 to 2005, where he was particularly involved in negotiating joint ventures and acquisitions in China. He has also worked on projects, acquisitions and joint ventures in Japan, India, Saudi Arabia, the US, Switzerland, Indonesia and South Korea, amongst others. He is British, married to an Argentine wife, and emigrated to Buenos Aires, Argentina with his wife and two children in 2008.
this type of site is very helpful to all.Jim O’Neil, a well-known Goldman Sachs analyst came up with the term back in 2001 in a paper titled “The World Needs Better Economic BRICs.” O’Neil’s point: The BRICs would become the world’s four dominant economies by 2050.Think of Indonesia as the “fifth BRIC.”
Cash For Gold Rates
Rob, excelent article. Do you know any ETF which includes Indonesia stock market? or which would be the five recommend stock to invest in? Hoping you are enjoying Buenos Aires, in this unusual grief days… Regards
Well, Indonesia should be okay until all the forecasted global warming catastrophes happen. Then you’ll wish you’d stayed far away.
@Francisco: the market vector Indonesia ETF trades in New York and has decent volumes
Pingback: plantacja lawendy
Pingback: survival fishing
Pingback: play roulette online free download
Pingback: healthy living habits
Pingback: official site
Pingback: How to sweat less
Pingback: people locator
Pingback: empower network loophole
Pingback: priscilla presley cirugia estetica
Pingback: jimmy rose
Pingback: Rick Grimes
Pingback: custom pen
Pingback: slot machine bar
Pingback: holly madison cosmetic surgery
Pingback: author homepage
Pingback: katrina kaif hot
Pingback: cirugia plastica en puebla
Pingback: paris hilton surgery
Pingback: mesothelioma on x ray
Pingback: garcinia cambogia
Pingback: dietary supplement
Pingback: warts treatment
Pingback: Horror movies
Pingback: trade binary options
Pingback: vishva dev cardiologist thousand oaks
Pingback: pure green coffee bean extract
Pingback: best ways to make money
Pingback: battlefield 4 forums
Pingback: how to get a free e cigarette
Pingback: mexico bancos
Pingback: cab to midway
Pingback: reconquistar a mi ex novia
Pingback: driving record points
Pingback: Metodos agrandar el pene
Pingback: pure garcinia cambogia extract
Pingback: Joshua A Jacobi
Pingback: scarlett johansson cosmetic surgery
Pingback: garcinia cambogia extract
Pingback: casino bonus ohne einzahlung
Pingback: At Home STD Testing
Pingback: online casino mit echtgeld bonus ohne einzahlung
Pingback: посуточная аренда квартир Минск
Pingback: book of ra online browsergame
Pingback: affiliate marketing
Pingback: additional reading
Pingback: click the up coming document
Pingback: click the following internet site
Pingback: Full Content
Pingback: just click the next post
Pingback: mouse click the following article
Pingback: simply click the following post
Pingback: simply click the up coming document
Pingback: This Resource site
Pingback: visit the following web site
Pingback: visit the following website page
Pingback: similar website
Pingback: please click the next internet page
Pingback: please click the up coming website page
Pingback: visit the following page
Pingback: Read the Full Article
Pingback: mouse click the up coming website
Pingback: please click the next document
Pingback: Suggested Internet site
Pingback: similar resource site
Pingback: simply click
Pingback: Check This Out
Pingback: click the following internet page
Pingback: Suggested Looking at
Pingback: simply click the next web page
Pingback: click through the following document
Pingback: More Support
Pingback: simply click the up coming site
Pingback: Learn Alot more Here
Pingback: please click the next website
Pingback: Read More At this website
Pingback: read on
Pingback: visit the next web page
Pingback: similar webpage
Pingback: simply click the next website
Pingback: click through the following website
Pingback: click through the next webpage
Pingback: please click the following article
Pingback: please click the following website
Pingback: Highly recommended Site
Pingback: Read More In this article
Pingback: Recommended Web page
Pingback: visit the following webpage
Pingback: please click the following post
Pingback: This Web-site
Pingback: just click the next document
Pingback: just click the up coming post
Pingback: linked internet site
Pingback: More about the author
Pingback: visit the next website
Pingback: click the up coming web page
Pingback: visit the next document
Pingback: Full Survey
Pingback: Highly recommended Web-site
Pingback: just click the following internet page
Pingback: mouse click the next site
Pingback: Learn Additional
Pingback: just click the following document
Pingback: Read the Full Document
Pingback: just click the up coming site
Pingback: related web page
Pingback: similar web page
Pingback: simply click the up coming article
Pingback: mouse click on
Pingback: visit the up coming post
Pingback: Click On this site
Pingback: simply click the following article
Pingback: Suggested Web site
Pingback: click through the next internet site
Pingback: Suggested Web page
Pingback: click for source
Pingback: mouse click the up coming post
Pingback: Recommended Site
Pingback: relevant website
Pingback: similar web-site
Pingback: click through the next page
Pingback: click through the next web page
Pingback: Find Out More
Pingback: visit the up coming internet site
Pingback: please click the following internet page
Pingback: just click the up coming article
Pingback: related web site
Pingback: visit the following post
Pingback: click the up coming website page
Pingback: simply click the following internet site
Pingback: simply click the next website page
Pingback: supplemental resources
Pingback: just click the up coming internet site
Pingback: More Information and facts
Pingback: resource for this article
Pingback: visit the following web page
Pingback: carbon marcky
Pingback: marko man
Pingback: makia julpo
Pingback: geometry regents help
Pingback: Discover This Info Here
Pingback: buy facebook followers
Pingback: mark mania
Pingback: click to view
Pingback: our video
Pingback: Bad Robot Surgery
Pingback: law videos
Pingback: universal remote
Pingback: Julia Airola
Pingback: Beverley Brumbelow
Pingback: Ngan Kenouo
Pingback: Las Vegas Escorts
Pingback: Webdesign los angeles
Pingback: Ronny Thacker
Pingback: Tory Stapf
Pingback: Sauflycdeole.pixub.com РЈС…РѕРґ Р·Р° РєРѕР¶РµР№ РІРѕ РІСЂРµРјСЏ РґРёРµС‚
Pingback: Chana Brunow
Pingback: Maryann Barczak
Pingback: best online data backup
Pingback: Nubia Niver
Pingback: Arnette Flores
Pingback: Fran Genter
Pingback: quarterback private acting coaches los angeles
Pingback: stevia goedkoop
Pingback: deezer gratuit
Pingback: video link
Pingback: 4 vigrx plus
Pingback: 3ds emulator
Pingback: buy garcinia cambogia
Pingback: youtube gaming network
Pingback: pillow holder for tablet
Pingback: Guide to optimize Facebook ads to get cheap traffic
Pingback: barbour outlet online
Pingback: weed seeds
Pingback: the best protein powder
Pingback: Payday Loans
Pingback: lon rosen la dodgers
Pingback: mp3 normalizer
Pingback: lon rosen magic johnson agent
Pingback: Los Angeles SEO service
Pingback: bra for large breast
Pingback: ipad games accessories
Pingback: programas para aprender a tocar guitarra
Pingback: 5KZscpgt4q 5KZscpgt4q
Pingback: friv games best online games at friv
Pingback: car title loan no credit check
Pingback: Pure Garcinia Cambogia Extract
Pingback: hacker un compte facebook
Pingback: honorbound cheats
Pingback: Unlock iPhone
Pingback: cheap fitflop shoes
Pingback: Karen Millen Outlet Online
Pingback: karen millen collection
Pingback: Unlock IMEI iPhone
Pingback: sell my car coral springs fl
Pingback: best internet marketing course
Pingback: breaking bad season 5
Pingback: angielski przez Skype
Pingback: cheap televisions
Pingback: internet marketing search engine
Pingback: griseofulvin bilirubin
Thanks to the tireless efforts of the Federal Reserve, currency in circulation is up $72.5 billion in the last year - which equates to $234 for every man, woman and child in America. And after rifling through his wife's purse yielded fruitless results, The Mogambo Guru has launched an all-out investigation to find his share. Read on...
With so much turmoil and political strife throughout the world, it can be difficult to realize how bright the future of technology is. Luckily, Stephen Petranek hasn't lost sight of that. Today, he describes seven important stories that will shape the future... and how a few savvy investors can make a killing in the process. Read on...
The Affordable Care Act creates a new health insurance marketplace (the exchange). But because of the great uncertainty about what buyers will enter the market and who will buy what product, the law creates three vehicles to reduce insurance company risk. John Goodman explains why this is such a dangerous proposition...
The biotech industry has dominated the market so far this year; and early investors in this sector have practically won the lottery. But with such an incredible run up, could this bull market be nearing exhaustion? Greg Guenthner investigates, and offers some sage advice for investors willing to take a chance. Read on...
Generally speaking, gold miners are bad businesses. They bury perfectly good cash in the ground and tend to issue lots of shares just to stay afloat. So when one comes along that actually turns out to be a good business, it's important to take note. Chris Mayer has found just such a company. Read on...