Care to venture a guess as to what country is the world's fourth largest by population, and 16th largest by gross domestic product? Few get the right answer, even with both descriptors. Likewise, since most underestimate the size and strength of this nation, they also underestimate the size and scope of one particular investment opportunity. The country: Indonesia. The stock: Indo Global Exchanges PteLtd (OTCMKTS:IGEX). Indo Global is planting the seeds to become that country's first, best (and so far, only) online stock-trading service... a country where Charles Schwab Corp. (NYSE:SCHW), TD Ameritrade Holding Corp. (NYSE:AMTD), and E-TRADE Financial Corporation (NASDAQ:ETFC) don't have a presence to get in Indo's way.
Contrary to popular belief, Indonesia is anything but a third world country. Its investors, in fact, were allegedly redirecting some of their capital last earlier in the year to what they themselves deemed were emerging markets, in search of higher returns than what may be achieved in Indonesia after higher fuel prices (stemming from an end to a key subsidy) created some inflationary pressure there. Since then, the country's GDP forecast for 2013 has been whittled down from 6.2% to 5.9%. Sound familiar? This will too. Also not unlike in the Western hemisphere, the adverse impacts of news and events are overblown there as well. That outflow reversed course by August, and since late that month Indonesia's stock market has gained 12% while the S&P 500 has gained about 3%. Translation: Indonesia's investment markets aren't going anywhere; the boat's simply too big to turn around now.
It's been said that the opportunity Indo Global Exchanges PteLtd is tapping into in Indonesia now is the same one Charles Schwab, TD Ameritrade, and E-TRADE Financial were aiming at in the United States in the mid-90's. And, it's not an off-base comparison. That period marked the rise of the empowered - via the internet - middle class investor, though it was all made possible by explosive growth that gave middle income people strong enough wages to enter the capital markets. Indonesia's key economic driver is its materials and agricultural business, but the net effect is still the same ... a wide swath of its populous now enjoys much more disposable (and investable) income than they ever have before. Evidence of that broad rise in Indonesian incomes comes in the form of a falling poverty rate, from 14.2% in 2009 to only 11.7% now, and a decline in the unemployment rate, from 7.9% in 2009 to 5.9% this year. Public debt is, unlike the U.S. and most Western countries, also shrinking, from 32.1% of GDP in 2009 to 24.0% of 2012's GDP. The economic benefit is helping every Indonesian restaurant, so much so that IGEX believes there are 30 million potential clients who are ready, willing, and able to become an online-trading customer, with another 110 million waiting in the wings with just a little more of the right economic nudge.
And make no mistake - Indonesians aren't apt to shy away from web-based investing ... one of the monumental hurdles E-TRADE, TD Ameritrade, and Charles Schwab were all facing back in the mid-90's, when the internet itself was new, not everyone had access to it, and even those who did were leery of trading stock online. Indonesians love the internet; it's the world's biggest single-country user of Facebook (yes, even more so than in the United States).
If nothing else says this not-so-little country is ready to hit the free-capital-market ground running, the nation's government can't wait to shed itself of several state-owned companies by selling them to the investing public there via IPOs. Two such IPOs have been slated for 2014, but the nation's government hopes it can put even more into investors' hands by 2014. It's difficult to call it IPO-mania (yet), but it is a sign of the changing times for the country. It seems to be just now starting its capital market revolution... the one the United States market went through in the late 90's, and the one China went through about five years ago. Yes, there were growing pains in the meantime, but both countries ended up fine, and the middlemen - the brokers - who largely facilitated the advent of the empowered-investor age did well throughout it all.
Bottom line? IGEX really is in a similar position as AMTD, ETFC, and SCHW were in just a few years ago... just in a different country. All three of those stocks have done well since online trading became a "thing" fifteen years ago. The only real difference is, Indo Global Exchanges doesn't have any online-trading competition in sight.
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