Exchange-Traded Funds In Indonesia

- 17 January 2022 07:00 WIB
An ETF can be designed to follow anything. (Unsplash/Yiorgos Ntrahas)
An ETF can be designed to follow anything. (Unsplash/Yiorgos Ntrahas)

JAKARTADAILY.ID - An exchange-traded fund (ETF) is a form of securities that follows an index, sector, commodity, or other asset but may be acquired or sold on a stock market in the same way that a conventional stock can.

An ETF can be designed to follow anything from the price of a single commodity to a huge and diversified group of commodities. ETFs can even be designed to mirror certain investing strategies.

An ETF is an exchange-traded fund as it is traded on an exchange in the same way that stocks are. The value of an ETF's shares fluctuates during the trading day as they are purchased and sold on the market.

This is in contrast to mutual funds, which are not traded on an exchange and only trade once a day after the markets have closed. Furthermore, as compared to mutual funds, ETFs are more cost-effective and liquid.

In Indonesia, ETFs have become increasingly popular since they were first launched in 2007 by Indo Premier under the name Premier ETF LQ-45 (R-LQ45X). According to data from the Indonesia Stock Exchange (IDX), the number of ETFs traded on the IDX reached 47 items by the end of May 2021, making it the largest in ASEAN.

Furthermore, numerous ETFs are listed outside of Indonesia but employ equities from the country, such as the iShares MSCI Indonesia ETF (EIDO), HSBC MSCI Indonesia UCITS ETF (HIDR), and MSCI Indonesia Swap UCITS ETF (XMIN/XMID).

Wawan Hendrayana, Head of Investment Research at Infovesta Utama, stated to Kontan that the increase in the value of transactions and funds under management in ETF mutual funds demonstrates investors' sustained interest in this product.

He explained that ETFs provide an alternate solution for investors, particularly institutions, looking to invest in index-based securities that give performance comparable to benchmarks but introduce more measured and visible risks.

Despite the fact that both are index-based, Wawan claims that ETFs outperform index mutual funds in terms of liquidity.

Editor: Mukhtar Wijaya

Source: Investopedia, Kontan


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