China is so dominant that the diversity and strength of other emerging Asian economies is often forgotten – Indonesia being a case in point.

The Indonesian market has been one of the better emerging market performers in 2022 and on a five-year view the MSCI Indonesia index has outperformed the wider MSCI Emerging Markets index, eking out annualised gains of 2.2% compared with -2.7% for the broader benchmark as at the end of October.

In the first 10 months of 2022 it was up a creditable 8.4% compared with a near 30% fall for MSCI Emerging Markets. The financial sector has a dominant position, with a weighting of more than 55%, with communication services a distant second at less than 13%.

The fourth most populous nation on earth, Indonesian stocks also have a material weighting in the MSCI Emerging Markets Asia ex-China index of 5.3%.

In November 2022 the country hosted a high-profile G20 summit and it has rapidly reduced the proportion of people living below the poverty line from close to 20% in the early 1990s to below 10% today. The country is a big exporter of strategically important commodities.

Reflecting on its recovery from the pandemic, a recent report from the World Bank noted that: ‘Sound macroeconomic fundamentals, sticky commodity export prices, and structural reforms will support aggregate demand.

‘GDP is projected to grow by 5.1% in 2022-23 and 5% in 2024. Contact-intensive sectors like services and tourism as well as manufacturing will also push the recovery and support job creation.’

This outlook is part of a series being sponsored by Templeton Emerging Markets Investment Trust. For more information on the trust, visit here

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