Indonesia pips China in emerging markets equity race

In Asia’s emerging markets  equities race, China is the fastest growing by size, but Indonesia has ranked first in growth in both the past five and 10 years.

While emerging Asia has outperformed the developed Asia-Pacific at various times in the past 10 years, volatility has remained high with emerging Asia outperforming developed Asia-Pacific when the market rises, but lagging when the market declines.

Russell Investments’ Emerging Asia Index covers 2,100 stocks in eight countries – listed in order of market capitalisation: China, Korea, Taiwan, India, Malaysia, Indonesia, Thailand and the Philippines.

The Russell Developed Asia-Pacific Index covers five countries: Japan, Australia, Hong Kong, Singapore and New Zealand (listed in order of market capitalisation).

Russell’s index strategy director, Noriyuki Oharazawa (pictured), says that while China grew the fastest, “market expansion goes not necessarily correlate with market performance”.

In the paper, “Global Markets Exploration”, Oharazawa says market expansion does not always correlate with performance, with Indonesia ranking number 1 in both the past five and 10 years, beating China which was fourth and fifth respectively in those timeframes.

Sponsored Content

Indonesia’s annualised return was 23.1 per cent in the past five years and 27.9 per cent in the past 10 years. China’s figures for the same periods were 16.7 per cent and 15.6 per cent.

While China is now the largest and fastest-growing equity market, five years ago Korea held that title, and 10 years ago it was Taiwan’s claim to fame.

Asian equity markets as a whole are expanding, and emerging Asia is growing “particularly fast”, Oharazawa says. “Ten years ago, emerging markets only accounted for 17 per cent of Asia but now accounts for 36.8 per cent.”

China has the largest investable equity market in emerging Asia, followed by Taiwan and Korea – these top three countries alone account for about three-quarters of the emerging Asia market, and have larger markets than Hong Kong, Singapore and New Zealand – which are classified as developed Asia-Pacific.

Emerging Asia small-cap stocks perform better than large caps in the same region, or small caps in developed Asia-Pacific countries. “Small caps account for about 20 per cent of emerging Asia, whereas they only account for 15 per cent of developed Asia-Pacific,” says Oharazawa.

Leave a Comment

Sort content by

How to estimate the equity risk premium

Given the importance of equity risk premium, it is surprising how haphazard the estimation of equity risk premiums remains in practice. This paper by Aswath Damodaran at the New York University Stern School of Business examines a number of different approaches to determining the equity risk premium and why different approaches yield different values. It

Are there enough credit opportunities to go around?

Investors are all talking about the same thing –that alpha will come from selective opportunities and implementation techniques within sectors, and the next year will be less about strategic or beta bets. Specifically credit opportunities remain front and centre of the collective investors’ radar. Managers, it turns out, are all also talking about the same

Integrating ESG in private equity

The PRI has launched a guide for ESG integration among general partners in private equity,  looking at ESG within a GP organisation and within its investment process. The guide provides suggestions on how to incorporate ESG factors into ownership practices and processes, including seeking appropriate disclosure from these companies on ESG risks and opportunities and

What consolidation means for the AP funds

The five Swedish AP buffer funds will be reduced to three, a new responsible body will be set up to formulate long-term return targets and a reference portfolio, and limits on unlisted investments will be lifted under the new plan put forward by the Swedish Government. These are the findings of The Pension Group, which

Predicting equity returns with rising rates

The impact of higher rates on equity returns is a concern for investors and to some extent an unknown. But by applying the concept a threshold correlation, as done with bond portfolios with a duration targeting framework, it is possible to better understand the complex interactions between equity returns and interest rate movements. The latest

Funds must embrace data to win

Superannuation funds in Australia are not putting enough emphasis on data and technology as a tool to strengthen member engagement or as a platform for their business. There is plenty they can learn from Rayid Ghani, chief scientist for the Obama for America 2012 campaign, who was the keynote at the Conference of Major Superannuation Funds

Previous