The iShares MSCI Indonesia ETF (EIDO) and the VanEck Vectors Indonesia ETF (IDX), the only U.S.-listed exchange-traded funds (ETFs) dedicated to Indonesian stocks, are up an average of about 13 percent year to date. While that lags the 17.5 percent returned by the widely followed MSCI Emerging Markets Index, there are some signs that Indonesian equities could be primed for more upside. Last week, Standard & Poor's lifted its rating on Indonesia's sovereign debt to BBB- from BB+, moving Southeast Asia's largest economy into investment-grade territory. Some market observers believe that S&P's move could fuel more upside for Indonesia's equity markets.

"S&P's decision comes on the back of a successful tax amnesty that earned the government more than $11 billion in revenue, helping to ease pressure on the budget and pay for much-needed infrastructure projects," according to Bloomberg. "The economy, which grew at a faster pace in the first quarter compared to the previous three months, has also been buoyed by a rebound in exports and strong consumer spending." (See also: Leveraging Demographics in Emerging Markets.)

EIDO, the larger of two U.S.-listed Indonesia ETFs, offers exposure to the theme of the rebounding Indonesian consumer, as consumer discretionary and staples stocks combine for 28 percent of the ETF's roster. The rival IDX, the oldest Indonesia ETF in the U.S., devotes over one-third of its weight to consumer sectors. PT Telekomunikasi Indonesia Tbk (TLKMF), the country's state-controlled telecom giant, was one of the best-performing stocks in Jakarta last Friday following news of the S&P upgrade. PT Telekomunikasi is EIDO's largest holding at 12.6 percent, while IDX allocates 8.6 percent to that stock.

"Foreign funds have bought $2.1 billion net of Indonesian equities this year, already exceeding last year's total of $1.26 billion, according to data compiled by Bloomberg. Inflow to the bond market has reached $6.3 billion as the yield on the benchmark government bond fell by more than 90 basis points to 7.04 percent," according to Bloomberg. Investors are putting money to work with Indonesian assets, but they are missing out on the rallies in the aforementioned ETFs. Year to date, EIDO and IDX have lost nearly $29 million on a combined basis while investors pour into broad-based emerging markets ETFs. (See also: A Quiet Star Among Emerging Markets ETFs.)

In March, Goldman Sachs "made a statement it expects a big flow of funds from Japan (particularly the nation's conservative institutional investors) entering Indonesia's capital markets when credit rating agency S&P decides to upgrade Indonesia's sovereign debt rating to investment grade. Indonesia is attractive as it can now be regarded one of the highest-yielding investment-grade markets in the world," according to Indonesia Investments. (See also: Sovereign Debt Overview.)