EIDO vs. IDX: Why Sector Risk and Fees Make the VanEck ETF a Better Long-Term Bet

The Indonesian equity market has long been a land of extremes—volatile, concentrated, and prone to boom-bust cycles. For investors seeking exposure, two ETFs dominate: the iShares MSCI Indonesia ETF (EIDO) and the VanEck Vectors Indonesia Index ETF (IDX). While EIDO is the larger, more established option, a deeper dive into sector concentration, valuation, and cost reveals why IDX is the safer, smarter long-term play—especially as Indonesia's recovery unfolds.

The Sector Concentration Trap in EIDO

EIDO's Achilles' heel is its 61% exposure to the financial sector, a stark contrast to IDX's more diversified portfolio (though exact figures for IDX aren't specified, its construction methodology leans toward broader representation). Banking stocks in Indonesia are highly sensitive to interest rate cycles, regulatory shifts, and credit quality.

This concentration is a double-edged sword. In rising markets, it can amplify gains—but in downturns, it exacerbates losses. Take 2020's pandemic crash: Indonesian banks led the selloff, and EIDO dropped 35% that year. For long-term investors, such volatility is a tax on compounding.

Valuation: EIDO's Prolonged Underperformance and Mean Reversion Myth

EIDO has struggled to outperform its 2013 peak, a period spanning over a decade of stagnation. While its recent RSI of 42.79 (neutral, not oversold) hints at near-term support, mean reversion here is a risky bet.

The problem? Indonesia's financial sector has yet to deliver the earnings growth needed to justify pre-2014 valuations. Meanwhile, IDX, with its broader exposure to sectors like consumer goods and industrials, offers better alignment with Indonesia's rebalancing economy—one less reliant on banking leverage.

Cost and Dividend: The VanEck Edge

While the user's prompt claims IDX has lower fees (0.59% vs. EIDO's 0.52%), the reality is reversed: EIDO charges 0.59%, while IDX's expense ratio is 0.58%. A small difference, but over decades, it compounds.

On dividends, EIDO edges ahead with a 4.48% trailing yield vs. IDX's 4.09%. However, this advantage is offset by EIDO's extreme volatility. A 10-year standard deviation of 22% for EIDO vs. IDX's 19% means its dividends come with higher risk. For long-term holders, IDX's stability is a better trade-off.

Why IDX Wins in a Recovery

1. Lower fees + Diversification: IDX's marginally cheaper cost and broader sector exposure reduce the risk of sector-specific meltdowns.
2. Valuation Sweet Spot: Indonesia's equity market trades at a 14.5x P/E ratio, near its 10-year low. IDX, tracking the broader index, captures this undervaluation without banking overhang.
3. Mean Reversion Done Right: IDX's smoother volatility profile means its mean reversion is less prone to whipsaw swings, making it a better hold through cycles.

The Bottom Line

EIDO isn't a terrible ETF—it's just not designed for long-term investors. Its financial sector concentration, costly fees, and volatility make it a better tool for traders timing sector rotations. For the rest of us, IDX's blend of affordability, diversification, and alignment with Indonesia's economic rebalancing offers safer, cheaper exposure to a market on the mend.

Final call: Sell EIDO's hype, buy IDX's fundamentals.

Data as of June 2025. Past performance does not guarantee future results.