Indonesia: After the Tsunami
02/18/2005 12:00 am EST
"With an almost unbelievable number of deaths and vast devastation, you'd think that Indonesia would be the last place to invest your hard-earned capital," says Neil George. "But you'd be wrong." Here, he looks at investing in the post-tsunami environment.
"Indonesia is a nation that's been dealing with tragedies for all of its existence. From similar natural disasters to brutal civil wars and terrorism, it keeps on coming. In addition, we're going to see billions and billions of dollars pouring into this country to rebuild and expand the infrastructure affected by the disaster. Much of the massive nation's mostly unaffected lands far away from the unfortunate carnage on select coastal communities will benefit as well.
"Why do I have such optimism while the rest of the world is still in mourning? Easy. I know the rest of the story of this nation and economy and have faith in the recently elected leader of Indonesia. Just this past fall, Susilo Bambang Yudhoyono took charge after years of education and hard work. Yudhoyono is up to the task. And it started far and away from Jakarta, all the way back to the state of Missouri where Yudhoyono earned his Master's degree from Webster University through the School of Business and Technology. So he's not only well-versed in the military of his nation but is equipped with the best global education, giving him the tools to lead his country and deal with the power brokers of the rest of the world.
"While much of what you've seen of Indonesia has been in its coastal communities, it's important to recognize that this is one of the few OPEC members that has vast, untapped and very underdeveloped oil and gas fields. Even before the tsunami, Yudhoyono had begun to instill confidence in global investors and corporations, including ExxonMobil, to come back to expand their investments in and toward development of Indonesia's petrol. This will go far toward fueling broader economic development. Getting the gas and oil fields back up and running (and further developed as quickly as possible) is a start in addressing the country's crucial challenges.
"There are two ways to put some money to work where your neighbors dare not even think about. First is the broad play on the local market through the closed-end Indonesia Fund (IF NYSE), run by the folks over at Credit Suisse. It's been strongly regaining lost glories over the past few months, right along with the recent rally reflecting the turnaround of political and economic fortunes. Be cautious and try to buy a few shares on the days of more dour news from Southeastern Asia and Indonesia.
"A second, more specific play, in addition to the closed-end fund play, is PT Telekomunikasi Indonesia (TLK NYSE). It's the main provider of local and long-distance telephone services. It also has a 65% stake in Telkomsel, Indonesia's largest cellular operator and one of the company's main growth drivers. In addition, the company's 3.5% dividend yield is another reason to own the stock. s a result, PT Telekomunikasi is an interesting speculative investment on the 'other side' of Indonesia's story."