Market Vectors ETF Trust has launched the Market Vectors Indonesia Small-Cap ETF (nyse arca:IDXJ), the first US-listed exchange-traded fund (ETF) designed to provide investors with pure play exposure to the small capitalisation segment of Indonesia’s stock market.
IDXJ is the second ETF introduced by Market Vectors that focuses exclusively on Indonesia, joining Market Vectors Indonesia Index ETF (nyse arca:IDX), which focuses on the large-cap segment of the fast-growing Indonesia economy. IDX has earned a five-star Morningstar rating on both a three-year and overall basis (as of 2/29/12).
Indonesia, home to roughly 240 million people, has Southeast Asia’s largest economy: USD834 billion in 2011. Beginning in 1999, the country embarked on a path of sounder fiscal and monetary policies that allowed it to improve its financial condition dramatically. As a result, the country has attracted substantial foreign direct investments and its sovereign debt rating has been upgraded to investment grade by both Fitch Ratings (as of 15 December, 2011) and Moody’s Investors Services (as of 18 January, 2012).
“Indonesia has grown rapidly over the past several years and we believe that it is well positioned to continue to prosper, with an economy supported by rising domestic consumption and higher levels of disposable income,” says Ed Lopez, Marketing Director at Market Vectors ETFs. “In our view, smaller cap companies that generate the majority of their revenues in the local market provide the best way for investors to gain exposure to the domestic growth story. In that regard, IDXJ provides a complement to our broader-based Indonesian ETF, IDX.”
IDXJ seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of Market Vectors Indonesia Small-Cap Index (MVIDXJTR), a rules-based, modified market capitalisation-weighted, float-adjusted index comprised of publicly traded small capitalisation companies that are domiciled and primarily listed in Indonesia, or that generate the majority of their revenues in Indonesia. MVIDXJTR was created by Market Vectors Index Solutions GmbH which develops tailor-made, investable indices that seek to provide comprehensive exposure to a given country or region.
As of 29 February 29, 2012, the leading sectors in the Index were Financials (39 per cent), Industrials (18 per cent), Energy (17 per cent), and Consumer Staples (15 per cent). To be included in the Index, companies must have a market capitalisation in excess of USD150 million, three-month average daily trading volume of at least USD1 million, and a minimum trading volume of 250,000 shares each month over the last six months. The average market capitalisation of the Index at launch was USD688 million.
Market Vectors notes that investing in the securities of Indonesian issuers involves risks not typically associated with investments in the securities of issuers in more developed countries, including expropriation, foreign ownership restrictions and government intervention in international trade, confiscatory taxation, and political instability, among others.
IDXJ joins the Market Vectors family of ETFs that, in addition to IDX, includes small- and all-cap emerging markets exchange traded funds such as India Small-Cap Index (SCIF); Germany Small-Cap ETF (GERJ); Russia ETF (RSX); Poland ETF (PLND); Russia Small-Cap ETF (RSXJ); Vietnam ETF (VNM); and Brazil Small-Cap ETF (BRF), among others.
IDXJ, Market Vectors 45th ETF, has a gross expense ratio of 0.70 per cent and a net expense ratio of 0.61 per cent, which is capped until at least 1 May, 2013. During such time, the expense limitation is expected to continue until the Fund’s Board of Trustees acts to discontinue all or a portion of such expense limitation.
