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

Disparity in policy portfolio risk profiles

A policy portfolio is a poor reflection of investor preferences, argued Peter Bernstein. This philosophical question has now been empirically tested by MIT’s Mark Kritzman, who shows the inter-temporal disparity of a policy portfolio’s risk profile. He suggests a simple framework for addressing this deficiency. Kritzman encourages investors to replace rigid policy portfolios with flexible investment policies.

Ventures on the risk spectrum

Hershel Harper received an early education in finance when he used to read Business Week in High School. The 43-year old now at the helm of the $27-billion South Carolina Retirement Systems, investing on behalf of South Carolina’s 350,000 public sector workers, says he knew back then he wanted to manage money: “I really am

Getting the commodities mix just right

While commodities are a controversial and problematic asset class to some investors, for others they are an ideal diversifier looking more attractive than ever. A mini-revival in commodity investing among US pension funds suggests the asset class may be enjoying a resurgence. The Los Angeles Fire and Police Pension System, Municipal Retirement System of Michigan

The end of beauty contest active management?

Designing and implementing concentrated, long-horizon investment mandates would support longer term thinking, align pension organisation’s goals with its stakeholders, and reduce transaction costs. This was one of the recommendations of a two-day workshop in Toronto last month, attended by a delegation of 80 pension fund executives from around the globe. Aimed at uncovering the meaning

Italian fund rides out crisis in style

The wrath of the European sovereign debt crisis may have left its mark on Italy in more ways than one, with both its financial and political scenes regularly sliding into crisis mode for the past year or two. However, the nation’s largest private pension investor, the €7.75-billion ($10.1-billion) Cometa fund, has firmly kept on track

Paul Marsh: live with low returns

The London Business School’s emeritus professor of finance Paul Marsh admits that you have to be slightly mad to embark on the kind of research detailed in the latest edition of Global Investment Returns Yearbook. This year Marsh and colleagues Elroy Dimson and Mike Staunton – Marsh describes the three of them, pictured below, as

Previous