Strategic Economic Developments in Indonesia Portend Substantial Long-Term Investment Returns for Equity investors

South Korea and Indonesia have agreed to finalize a free-trade agreement by years end. Indonesia is already one of the largest and fastest growing economies in Asia. Leveraging comparative advantages and the existing positive economic relationship between the two will create wealth in both countries. Recently, Indonesia also negotiated with India to increase cooperation in agriculture, transportation, defense and security, which will also create wealth for both countries. Additionally, Indonesia is planning on investing US$ 160 Billion in infrastructure projects over the next five years through Public / Private Partnerships. All told, Equity investors in Indonesia could reasonably expect to triple their investment over the next five years with the current low valuations of Indonesian stocks. ETF’s remain one of the lowest risk ways to invest in Emerging or Frontier Markets.

    

Indonesia Market Oversold Nearterm

The chart for IDX (Indonesia ETF) shows Money-Flow has stabilized, DMI / ADX slightly oversold, and Williams %R way oversold. There could easily be a substantial near term rally - before worry about next year's elections and current account balances resume downward pressure on the Indonesia stock market.

Indonesian Markets may benefit from improving US / Iran relations

The Indonesian economy will benefit greatly from a decreases in oil prices. The new Iranian president seems determined to eliminate economic sanctions on Iran. With President Obama's willingness to negotiate and eagerness to stimulate the world economy, oil prices could significantly decrease. Decreasing oil prices will decrease pressure in Indonesia's account deficits and inflation rate, leading to a noticeable improvement in economic conditions six to nine months from now.

Time to Add Gulf States (GCC) to your Portfolio

Frontier market's are often less volatile than larger markets and can decrease the overall risk of a portfolio. The Portfolio Analytic's of MES (ETF) reveals a Beta of .63 and a Correlation of .62 vs the S&P 500 Index. Volatility for MES at around 13 is also lower than the Vix, which is typically at 14 or above. Finally, MES technically looks poised to rally through the end of the year and fundamentally it is unlikely any major financial shocks are on the horizon (MES is heavily weighted to the Financial Sector).