Indonesia is On Fire

madhedgefundtrader's picture

Who said quantitative easing wouldn’t work? The only problem is that you have to speak Bahasa, eat nasi goreng, and live South of the equator, to take full advantage of Uncle Ben’s munificence. Since the rumblings about a global, synchronized QEII began in September, $2 billion a day has been flooding into emerging markets, and Indonesia has been at the top of the list.

Some of the happiest days of my life were spent in this bucolic tropical backwater during the seventies. My investment in the ETF (IDX) on launch day has made me happier still, soaring by 360% since inception (click here for the call at http://www.madhedgefundtrader.com/october_1__2009.html ). A rupiah that has been steadily appreciating against the dollar has added a nice double leveraged effect to the upside.

Despite the triple digit return, it could still be early days for the world’s largest Muslim country. Some $9 billion in foreign capital has poured into the local rupiah denominated bond market, and a further $2.5 billion has been plopped down in the stock market. Multinationals have made a further $8 billion in direct investments, a capital flow you know I always love to follow. The prices for its largest commodity and energy exports have been rising.

The government has been targeting almost Chinese levels of GDP growth of 7%-8%, and private analysts say than that 6.5% will be achieved this year and next. Stocks are not cheap at a 13.5 multiple, but how much should you pay for earnings that are growing 25% a year? Next month, President Obama will visit the land of his childhood to highlight stable relations between the two countries, to help sew up some trade deals, and no doubt, to visit his former pet monkey

IDX has had the field to itself until now, as local Indonesian stocks are not easy to buy for US based online traders. Then in May, BlackRock launched its own entrant in the field (EIDO), which has basically since gone straight up. While Indonesia is no longer as cheap as it once was, it still deserves a place in every emerging market portfolio. This could be the next China.

To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.

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williambanzai7's picture

I have a pretty good idea of what goes on in there ;-)

stev3e's picture

Did you actually have lunch with Indo Nesia?

Precious's picture

Indonesia is synonomous with corruption.

williambanzai7's picture

The most important  contract clauses in any Indonesian deals are choice of law and litigation forum and foregin corrupt practices. Thats sums it up in a nutshell.

Have fun with the bond stampede, stock riot and real estate gold rush MHFT... 

 

copernicus's picture

Those who have made it to Yogyakarta know that Indonesia will never be a "Tiger"

Better version of Africa, resources is what they have, thats all folks...

JW n FL's picture

Och Ziff... http://www.ozcap.com/ follow the smart money around?

99er's picture

Your enthusiasm for Indonesia may be based on a wonderful stay in Bali but the tropical paradise differs greatly from the actual business environment. The country is corrupt from top to bottom. Hell, even police officers have their hand out so you can cross the street. Good luck!

Cyrano de Bivouac's picture

Agree- Have an Indian businessman friend-India like that too.

doolittlegeorge's picture

But did you make it to Yogyakarta?  Beautiful art among other things...