"Thank you very much for your thoughts a few days ago on the Indonesia stock market. I've long followed Indonesia and found that, until quite recently, it tended to be overlooked in favor of the BRICs. It seems like the word is finally out now on Indonesia, however, so I wouldn't be inclined to buy at present, but would await a pullback to become a part of an exciting longer-term opportunity.

"In many respects, Indonesia can be seen as a cross-roads of many Fullermoney themes, most notably emerging Asia and commodities. Indonesia is rich in commodities from coal to palm oil to lumber to gold to tin to rubber -- to name just a handful. Indonesia is also rich in people and could become a manufacturing center once infrastructure issues are ironed out. It's the expense of getting the product to port that currently makes Indonesia less competitive than China, for example.

"The headwinds other than infrastructure are good governance challenges and the battle against corruption. In my view, both of these headwinds are overstated. Indonesia has made much progress in the past 12 years in putting a fairly strong democratic government into place. While corruption remains, it appears to be less prevelant than before. Much of what Russell Napier said about India in his recently-posted report entitled "Buy Chaos, Sell Order" applies in large part to Indonesia.

"Visitors to the country will find a robust capitalist society with a press in SE Asia that is the most aggressive and free. Jakarta is the focal point of impressive economic growth, but other areas are also beginning to pick up too, as evidenced by a recent article in the Wall Street Journal:


"For those who want to dip a proverbial toe into Indonesia, there is an ETF (IDX) and a closed-end fund (IF) for US investors. PT Astra International, which is listed in Jakarta, is probably the best proxy for the Indonesian economy as a whole, although several of the banks also serve that function:

"Bank Rakyat, Bank Danamon, Bank Mandiri, and Bank of Central Asia. Personally, my most recent purchase there is a basket of property developer stocks, with PT Ciputra being the most notable.

"As long as I continue to find that well-educated people are surprised to learn that Indonesia is the fourth largest country in the world by population, I will stick with Indonesia as an investor. Ditto for all of those would-be investors who are "concerned" about the country's status as an Islamic-majority nation. That's the wall of worry that will help this market to [go] up again and again over the medium to longer term."

David Fuller's view Many thanks for this detailed, informative and important email, contributed in the spirit of Empowerment Through Knowledge.

Thanks also for the WSJ article, for which I have created a PDF, as the link above may require registration.

Your point: "Indonesia can be seen as a cross-roads of many Fullermoney themes, notably emerging Asia and commodities" is absolutely correct. Indonesia (weekly 10-yr, 5-yr and daily) was a leader in the previous bull-run and in this cycle it has led the recovery among Asia's larger countries since the low in late October 2008. Indonesia is still receiving a vote of confidence from debt investors, enabling its 10-year government bond yields to reach the lowest level for which we have recorded data. The rupiah has also returned to its pre-2008 meltdown level against the US dollar. Subscriber's will find additional information in the Library via a Search for 'Indonesia'.

Although we like Indonesia (see also Eoin's comment on 17th March), and how could one not given the impressive performance during two consecutive bull cycles and counting, I personally have lacked your vision by not investing directly in either its shares or an Indonesian fund. My 'wall of worry' problem is that I remember it as a chaotic and mildly scary place when I first visited in 1980 with TCS, although the hotel rooms were magnificent and certainly superior to anything that I could find in London. I visited several times in the 1980s, including a delightful trip at the invitation of the central bank, Bank Indonesia, to conduct a private chart seminar for a dozen of their senior personnel.


For anyone else with the wisdom to have invested in Indonesia, it remains a momentum play until or unless we see a close beneath 2800. For us wannabe stakeholders, the next buying opportunity will be a mean reversion narrowing the current overextension relative to the rising 200-day MA shown above. Meanwhile, I am surprised that the UK does not have a listed Indonesian fund or tracker.