Under the Radar: 2 Beaten-Down Asian Markets Trading at Bargain Prices

Every quarter, I get an email from Meb Faber at Cambria Funds with an updated chart of the world’s cheapest stock markets.

Meb uses the CAPE ratio and applies the same math to earnings, cash flow, book value, and dividend yield, then ranks the nations accordingly.

While I can do the calculations myself, his email reminds me to share the data with folks looking for Under the Radar opportunities in global markets.

This is not about diversification.

It is about pure greed.

Buying these markets through individual stocks has been profitable for patient, aggressive investors. It has beaten the broader markets and crushed buying the top-performing, most highly valued markets.

Two years ago, the cheapest markets were Brazil, Colombia, and Poland.

The Latin American markets have almost doubled, and Poland is up more than 40%.

Latin America dominated the bottom 25% of the valuation rankings a few years ago.

Today, Asia is gaining ground.

Seven of the ten cheapest stock markets on the planet are in Asia.

I want to highlight two that have been moving toward the top of the cheap pile.

Both have experienced steep sell-offs this year and are now trading at incredibly low multiples of cash flow and asset values.

Given the shift toward Asia we have noticed in global supply chains and markets, both appear to offer an asymmetric risk-reward opportunity.

Those markets are Indonesia and the Philippines.

Indonesia has valuable natural resources, a growing consumer market, and an expanding industrial base.

The Philippines has a young workforce, a substantial services industry, and an established role in electronics manufacturing.

Both have opportunities to benefit as companies diversify production and investment across Asia.

And both have suffered setbacks that have made their stock markets considerably less expensive.

For investors who want exposure without selecting individual companies, two exchange-traded funds offer a practical starting point:

• iShares MSCI Indonesia ETF (EIDO)
• iShares MSCI Philippines ETF (EPHE)

Let’s look at why these markets have become so cheap, what could drive a recovery, and where the risks remain.

Indonesia (EIDO): Resources, Industry, and a Market Under Pressure

Indonesia has a compelling combination of domestic demand, natural resources, and industrial potential.

The World Bank projects 5% economic growth in 2026, supported by household consumption, investment, and government spending.

That steady expansion provides a broad foundation for companies serving consumers and businesses across the country.

One of Indonesia’s most promising opportunities is its push to process more natural resources at home.

The country is developing capacity in nickel, bauxite, copper, iron, and steel, with the goal of turning raw materials into higher-value products.

Downstream industries accounted for nearly 30% of reported investment in the first half of 2026.

That investment can support growth in mining, materials, industrial parks, transportation, logistics, and power.

The Asia ex-China opportunity does not require Indonesia to replace China.

It can benefit as companies build more capacity across Asia and diversify production.

Chinese companies and capital have helped fund some Indonesian projects, while the resulting production may serve a broader international market.

Indonesia’s resources and location give it a natural role in that expanding network.

A large population adds another source of long-term potential.

As incomes rise, demand should grow for financial services, communications, transportation, housing, and consumer goods.

That gives investors a chance to find businesses benefiting from both industrial investment and a developing domestic market.

Why Has Indonesia’s Stock Market Fallen So Far?

The economic potential is appealing.

The stock market’s recent performance has been anything but.

According to iShares, EIDO’s net asset value total return was down 36.37% year to date through Oct. 13.

That is a substantial decline for a country whose economy continues to expand.

The sell-off reflects more than concerns about economic growth.

Investors have been reassessing the transparency and investability of Indonesia’s stock market, along with the direction of economic policy.

In January, MSCI raised concerns about opaque ownership structures, limited free float, and trading practices that could undermine reliable price formation.

It warned that unresolved issues could affect Indonesia’s status in its indexes.

That matters because global investment funds use those indexes to guide their investment decisions.

A warning about index eligibility can create additional selling pressure when foreign investors are already pulling money out of the market.

Indonesian authorities have responded with reforms, including more detailed shareholder disclosures and a roadmap to raise minimum free-float requirements.

MSCI has said it is assessing the scope and effectiveness of those changes.

These reforms will take time to prove themselves.

But they also give Indonesia a clear route toward restoring confidence: better disclosure, more investable shares, and stronger price discovery.

Fiscal policy has also been in focus.

Investors have questioned the cost of the government’s spending plans and the role of the state in financial markets.

The government has recently ordered spending restraint to keep the budget deficit below its 3% legal ceiling.

That reinforces fiscal discipline, although markets will want to see it maintained.

Bank Indonesia has also reaffirmed its independence.

Those are encouraging developments, but investors will continue watching currency stability, transparency, and policy credibility.

The Currency Problem

A weaker rupiah has compounded the decline for American investors.

When Indonesian stocks fall in local currency and the rupiah also weakens against the dollar, U.S. investors can suffer losses from both directions.

Currency pressure can also raise concerns about capital flows and the willingness of foreign investors to return.

The global backdrop has not helped.

In September, investors withdrew $26.3 billion from emerging-market stocks and bonds as a hawkish Federal Reserve strengthened the dollar and lifted yields.

Higher global interest rates and dollar strength have made the environment more difficult for emerging markets.

The encouraging part is that Indonesia is addressing some of its most visible market-structure problems while its economy continues to grow.

Investment in resource processing and infrastructure remains substantial.

If disclosure reforms gain credibility, fiscal policy stays within bounds, and the currency stabilizes, even a partial recovery in investor confidence could give beaten-down valuations room to improve.

That is the opportunity I want to investigate.

The Philippines (EPHE): A Consumer Economy at a Discount

The Philippines offers a different set of strengths.

A young workforce, a substantial services sector, and steady remittances support household spending.

Remittances exceeded $41 billion in 2024, helping families and providing a reliable flow of foreign exchange.

The World Bank points to consumption, urbanization, and remittance income as important parts of the country’s development.

That steady consumer demand creates room for companies in banking, retail, telecommunications, housing, health care, and financial services.

The services sector provides another growth engine.

The Philippines has built a strong position in business-process outsourcing and related work for global companies.

Its workforce could help the country win additional technology and business-service activity as firms broaden their operations across Asia.

Electronics and semiconductors offer another promising avenue.

Electronics account for a large share of Philippine exports, and the government is working to attract more semiconductor and artificial-intelligence investment.

The country already participates in activities such as semiconductor assembly and testing.

Additional investment could support suppliers, logistics providers, and technical services.

This is another practical way to benefit from supply-chain diversification.

Companies do not have to move all their production from China to the Philippines for the country to gain.

Adding capacity, suppliers, and services in the Philippines can create jobs and business opportunities while helping global manufacturers build more resilient networks.

Why Has the Philippine Economy Slowed?

The country’s long-term strengths have not prevented a difficult period.

The Philippines has been dealing with allegations of corruption involving flood-control and public-works projects.

The allegations prompted investigations and tighter scrutiny of infrastructure spending.

The cleanup is necessary, but the pause in project activity has come at a cost.

In the second quarter of 2026, Philippine GDP grew just 2.3% year over year, its slowest pace since 2021.

Construction fell 14.8%, while investment contracted 9.2%, marking a fourth consecutive quarter of decline.

The government linked the slowdown partly to the scandal, which led to stricter project reviews and delayed public spending.

The effects extend beyond construction companies.

When infrastructure projects are delayed, demand also slows for materials, transportation, financing, and local services.

Private businesses become more cautious about investing when they cannot be sure when public projects will resume.

The IMF has also cited weak private-investment confidence, the property slowdown, and higher energy costs among the risks to growth.

Energy Prices and Currency Pressure

The Philippines imports oil, making expensive energy another challenge.

Higher fuel prices can raise inflation and the import bill while squeezing household purchasing power.

Higher U.S. interest rates and a stronger dollar can also pressure the peso and make local equities less attractive to global investors.

Those problems have arrived at the same time that domestic confidence has weakened.

It is not a particularly attractive combination.

But it helps explain why investors have become less enthusiastic about Philippine stocks.

And when enthusiasm disappears, valuations can become interesting.

What Could Drive a Recovery?

There are reasons to remain constructive.

The investigations and project reviews are intended to improve oversight.

The country still has long-term support from consumption, remittances, services, and electronics manufacturing.

The IMF expects growth to improve in 2027 after a slower 2026, with faster implementation of reforms and public investment offering potential upside.

Better infrastructure, reliable electricity, and stronger project execution could help turn the country’s existing strengths into faster, more productive growth.

A return to well-governed infrastructure spending would be an important development.

It could improve business confidence, restart construction activity, and support companies that depend on domestic investment.

The Philippines has plenty to build on.

The question is how quickly the country can restore confidence and put its investment plans back to work.

Two ETFs, Two Different Opportunities

Investors do not have to select individual Indonesian or Philippine companies to participate in a potential recovery.

EIDO and EPHE provide exposure to established businesses in their respective markets.

Both funds have been punished by market weakness, even as their underlying economies retain attractive long-term growth prospects.

That combination gives patient investors a chance to buy established businesses at valuations that could benefit if confidence, earnings, and regional investment improve.

iShares MSCI Indonesia ETF (EIDO)

EIDO offers exposure to Indonesia’s domestic economy, with a particularly strong emphasis on banking.

Its three largest positions are:

• Bank Central Asia
• Bank Rakyat Indonesia
• Bank Mandiri

Together, those banks represent approximately 45% of the fund.

Other important holdings include Astra International, a diversified industrial and consumer conglomerate, and Telkom Indonesia, a leading telecommunications provider.

The portfolio also has exposure to energy and materials companies, connecting it to Indonesia’s resources and industrial development.

EIDO therefore offers a combination of financial services, domestic consumption, industrial activity, and natural resources.

The concentration in banking is important.

If Indonesia’s economy continues expanding and investor confidence improves, its major financial institutions could benefit.

But the same concentration means problems affecting banks or domestic credit conditions could weigh heavily on the fund.

iShares MSCI Philippines ETF (EPHE)

EPHE has a different portfolio.

Its holdings are closely tied to the Philippines’ domestic economy, including ports, banks, property, utilities, and telecommunications.

Its largest position, port operator International Container Terminal Services, represents approximately 23% of assets.

Other major holdings include:

• BDO Unibank
• Bank of the Philippine Islands
• Metropolitan Bank & Trust
• SM Prime Holdings
• SM Investments
• Manila Electric
• PLDT

These are businesses that can benefit as trade, consumption, urbanization, and infrastructure investment expand.

EPHE is not a direct semiconductor or electronics fund.

Instead, it provides exposure to the ports, banks, property, power, and communications networks that support a growing economy.

That distinction matters.

The Philippine economy may attract more electronics investment, but the fund’s returns will depend primarily on the performance of the companies it actually owns.

The large position in International Container Terminal Services also means that one company can have a substantial influence on the fund’s performance.

The Valuations Are What Make This Interesting

The economic stories are worth following.

The valuations are what make me want to investigate further.

As of Oct. 13, the two funds were trading at approximately the following levels:

Valuation Metric	Indonesia (EIDO)	Philippines (EPHE)
Price-to-earnings ratio	9×	8×
Price-to-book ratio	1.4×	1.0×
Trailing dividend yield	3.5%	3.0%

Those are inexpensive valuations for markets with long-term economic growth potential.

Of course, low multiples do not automatically make an investment attractive.

Indonesia has serious questions to answer about market transparency, governance, and policy credibility.

The Philippines needs to restore confidence in public investment and get its construction and infrastructure activity moving again.

Both countries remain exposed to currency fluctuations, higher global interest rates, and energy costs.

We also need to remember that ETF valuations are portfolio averages. The funds contain different companies, sectors, and risks, so a low multiple does not guarantee that every holding is a bargain.

Still, the combination of depressed valuations and identifiable recovery catalysts deserves attention.

We do not need every problem to disappear.

We need enough improvement in confidence, earnings, and investment activity for the market to begin assigning higher values to the businesses these funds own.

A recovery in valuations would add another potential source of return alongside dividend income and business growth.

What Could Unlock the Value?

There are several developments I would watch closely.

In Indonesia, I want to see progress on shareholder disclosure, free-float requirements, and the concerns raised by MSCI.

Better market transparency could make Indonesian equities more attractive to international investors.

I also want to see continued fiscal discipline, currency stability, and evidence that industrial investment is translating into stronger corporate earnings.

In the Philippines, the most important near-term developments involve restoring confidence in infrastructure spending and getting delayed projects moving again.

Stronger construction activity, improved private investment, and a recovery in economic growth could help the companies represented in EPHE.

For both markets, a less difficult global environment would help.

A more stable dollar, lower pressure from international interest rates, and manageable energy prices could make emerging-market investments more attractive.

None of those developments is guaranteed.

But we have identifiable problems, identifiable potential improvements, and valuations that already reflect a considerable amount of pessimism.

That is the kind of combination I like to investigate.

Buying When the Crowd Has Lost Interest

Indonesia and the Philippines are not identical opportunities.

Indonesia offers a growing consumer economy, valuable natural resources, and expanding industrial capacity.

Its stock market has been hit particularly hard by concerns about transparency, governance, policy, and the currency.

The Philippines has a strong services tradition, an established electronics industry, remittance-supported consumers, and a young workforce.

Its recent difficulties have centered on public-works corruption, slower construction, and weaker investment.

Both have also faced the challenges of higher global rates, dollar strength, and costly energy.

Those problems are real.

They also help explain why these markets have become so inexpensive.

The long-term opportunity remains.

Indonesia is investing in domestic industry and resource processing.

The Philippines has room to expand in services, electronics, infrastructure, and domestic consumption.

As global businesses diversify their supply chains across Asia, both countries have opportunities to attract investment.

And unlike investors chasing the most popular markets at the highest valuations, we have the chance to investigate these opportunities after substantial declines.

For patient investors willing to accept the risks, modest positions in EIDO and EPHE could provide a useful foothold in the expanding Asia ex-China opportunity at bargain-basement prices.

I do not need these countries to become the next great stock market sensation.

I need the businesses to keep growing, the most serious problems to improve, and investors to eventually recognize that the companies are worth more than today’s depressed valuations suggest.

That is how buying the world’s cheapest markets can become a very profitable exercise.

The path will not be smooth.

But when everyone else has lost interest, that is often when I start paying closer attention.