By Vikram Subhedar
HONG KONG Aug 28 Indonesian exchange traded
funds bore the brunt of heavy redemptions from U.S. investors on
Tuesday as the selloff in deficit-riddled emerging markets
Fears of a U.S.-led military strike against Syria sparked a
slide on Wall Street that exacerbated the weakness in South East
Asian stocks and currencies on Wednesday with Indonesian stocks
now on track to become Asia's worst performing share market this
Efforts by Indonesian authorities to stem outflows, spurred
by an imminent reduction in U.S. monetary stimulus, have failed
to reverse the tide as a crippling current-account shortfall,
slowing economic growth and high inflation have darkened the
The rupiah has dropped 11.7 percent so far this year
against the dollar, doing only slightly better than the Indian
rupee which has also been hammered on concerns about a turn in
Fed policy and capital outflows. India is facing similar issues
of a bloated current account deficit and weak growth chilling
For Indonesia, a darling of foreign investors until
recently, the latest signs are disheartening. U.S. retail
investors also appear to be throwing in the towel on Southeast
Asia's biggest economy.
The Market Vectors Indonesia ETF, managed by
emerging market-focused index investor Van Eck Global, slumped
7.6 percent in U.S. trading on Tuesday and closed overnight at
the deepest discount to net asset value since it listed in
An ETF focused on Indonesian small-caps fell 8.6
The iShares MSCI Indonesia ETF fell 8.4 percent.
Tuesday's slide means the ETF, an investor favourite till as
late as April this year, has now lost a third of its value over
the past three months.
The MSCI Emerging Markets index meanwhile is down
a little over 8 percent over the same period.
Exchange traded funds have became popular in recent years
particularly among Western retail investors who ordinarily have
limited direct access to emerging markets such as Indonesia.
ETFs also provide exposure to these markets at lower costs than
traditional mutual funds.