Indonesia is one of Asia’s most promising emerging countries, filled with growth opportunities. We analyze the 3 most important stock market indices of Indonesia.
Indonesia is one of the most interesting emerging economies in Asia. It has experienced tremendous economic growth over the last few decades, attracting plenty of manufacturing activity and developing many companies of its own. Additionally, the government’s public finances are in very good shape.
What many people will not know is that Indonesia is also one of the most populous countries in the world, with almost 300 people. Hence, it has a lot of potential.
For those who are interested in investing in Indonesia but do not want to pick individual stocks, an ETF is a very good option. In the next few sections, we will analyze the most important stock market indices in Indonesia:
The IDX Composite is the main stock market index of the Jakarta Stock Exchange, the largest in Indonesia.
It was introduced in 1983 with the original name of JSX Composite and an initial value of 100 points. Its name would change years later into IDX Composite.
The IDX Composite is used to measure the performance of all the stocks listed in the main category of the Jakarta Stock Exchange.
As a result, the exact number of companies within the index varies over time. Stocks are weighted according to their market capitalization. Consequently, the largest ones tend to dominate the performance of the index.
Because the IDX Composite has many small-cap stocks, it is a difficult index for passive fund managers to replicate, so we may struggle to find an ETF tracking it.
However, it is a great instrument for analyzing the historical behavior of the Indonesian stock market. When it comes to ETFs, you will probably have to pick one of the two indices that we analyze next.
If you want to learn additional information about the IDX Composite index, here is the link to its official website.
The FTSE Indonesia is a stock market index published by the British company FTSE Russell, a subsidiary of the London Stock Exchange, and one of the largest providers of indices in the market.
This index is composed of all Indonesian stocks that are part of the global FTSE All World stock index. It is an excellent option if you are looking for an ETF to invest in Indonesia.
The number of stocks within the index fluctuates over time due to market conditions, but we will usually find about 30-35 companies. As a result, it offers us a good degree of diversification, making it possible to invest in large and medium cap stocks.
Within the FTSE Indonesia index, companies are weighted based on their free float-adjusted market capitalization. Hence, larger companies tend to have larger weightings.
For more details about the index, here is the link to the website of FTSE Russell.
Another very good option to invest passively in Indonesia is the MSCI Indonesia, published by the US company MSCI.
It is composed of all Indonesian companies that are part of the global MSCI Emerging Markets World Stock Index.
The number of stocks within the index fluctuates over time, depending on how many companies meet the eligibility criteria to be included, but it is usually around 20-25. It is worth noting that the financial sector represents about 50% of the index.
For additional details, you can visit MSCI’s website.
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And if you want to read about indices in other promising countries, check out the following section:
Funds and ETF