Bric_abreas_20060305175613
The WSJ asks, "what’s hotter than emerging markets?"

The answer is BRICs: Brazil, Russia, India and China.

WSJ:  "Goldman Sachs popularized the term in a 2003 report that suggested these four economies might one day surpass Japan and the West as the most important in the world. By 2050, Goldman ventured, only the U.S. and Japan could have larger economies than any of the BRICs.

The BRIC funds, which invest primarily in the BRIC countries, aren’t currently offered as mutual funds to the broader investing public because they aren’t registered with the Securities and Exchange Commission. Fund managers at Schroders and Templeton, however, said they are looking into registering in order to offer BRIC mutual funds in the U.S. Meantime, many emerging-market mutual funds, which are widely available in the U.S., give investors access to the BRIC countries.

BRICs returns have been eye-popping: while the Morgan Stanley emerging-market index is up 171% since the end of 2002, Morgan Stanley’s BRIC index has surged 262%."

There is a risk in this strategy: the limited number of companies in which to invest from these 4 nations:

"By focusing on four countries, BRIC funds also have a much smaller universe of stocks than broader emerging-market funds. That means an increasing amount of money is chasing a relatively confined group of stocks. The list of attractive companies is made even shorter since the Russian market offers little outside of energy and natural-resource companies, and China’s vast domestic stock market is closed to most foreign investors."

I cannot imagine ever investing in Russia, which is essentially a state run criminal enterprise (disagree with me? Then you go to Jail), while China treats overseas investors like they had Avian Flu, hence the appeal of the surrounding feeder nations: Korea, Japan, Malysia, Taiwan and Australia. That leaves India and Brazil (and I’ve liked the Bovespa for some time).

Hardly a compelling investing thesis, at least as far as individual stock selection is concerned.

On the other hand, if this were an ETF or Index Fund, it could be an absolute home run . . .

>

Source:
Going for BRIC: ‘Emerging’ Fund Lures Investors
Firms Respond to Strong Interest In Risky Markets
Such as China; Lofty Returns Are Projected

CRAIG KARMIN
WSJ, March 6, 2006; Page C1

http://online.wsj.com/article/SB114159853717389829.html

Category: Investing, Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

17 Responses to “Thick as a BRIC”

  1. royce says:

    It’s interesting that you’re pointing emerging markets out now. The other day you had a post up on how the general public is always the last to the party, and a recent Journal article pointed out that the retail investors were chasing returns into emerging market funds even though these companies have already been bid way up. Shouldn’t that be some kind of a signal?

  2. ChinaLawBlog says:

    I agree with your comments on both Russia and China and I would add that I am highly skeptical of the transparency of most of the companies in both countries. There is obviously a lot of money to be made in both countries, I am just not sure their stock markets are the place.

  3. Gray says:

    I am from Russia and my local investments here made good chunk of money recently. What is specific for Russia that it has over-liquidity inside. Constant huge supply of easy (and dumb) money from oil & gas export distorts market sentiment and forces investors to buy overvalued assets. It is only way here to make money by trading.
    I remember Internet bubble and see many similarities but as investment advisor, I have to stay in the game…

  4. rckang says:

    Agreed. A BRIC ETF would be an ideal addition to an EFA/EEM/EPP combo for international equity portion of a highly diversified portfolio. Problem: I was looking for a good commodity ETF back in ’02 when there was nothing but IGE and XGD/XEG (Toronto). Nothing in terms of investable commodity ETF until ’05-06. Thus, probably no BRIC ETF until way too late … again.

  5. doug says:

    Really don’t mind if you sit this one out rckang?

  6. Royce,

    A new BRIC/ Emerging markets mutual fund could be seen as a topping signal for that secror.

    Recall all of the new Net funds circa 1999; More recently I’d guess it would be energy funds and dividend funds.

  7. royce says:

    Barry:

    That’s what I figured. Seems like you’re kind of bullish on them, though. Did I get that wrong?

  8. Idaho_Spud says:

    Cute Barry :) I’m rather fond of Aqualung myself.

  9. Marcos D. Medeiros says:

    Well, I don’t know India, but you should take a better look into Brazil. The country is now on a very unstable status, it will probably get out of the current crisis better, but it is not a riskless bet. Beware that some governement’s numbers may be screwed, and the media coverage is almost all useless (not to say manipulated).

  10. Royce,

    I liked the Brazilian Bovespa — but even that is looking a bit ahead of itself:

    http://www.latin-focus.com/latinfocus/countries/brazil/brastocks.htm

  11. royce says:

    Barry-

    Up from 10k to almost 40k in two years. Wow.

  12. danny says:

    since stomaching too much risk is not my cup of tea, we play it [India] safe.

    We like the ADRs of IT/consulting giants INFY and SAY.

    Those companies have blockbuster client lists (huge chunk of the Fortune 1000) and the stocks keep on going up b/c the Street thinks IBM and ACN will eventually swallow them.

    fine with me!

  13. saurabh says:

    IBM swallowing INFY, a joke man. U will see the indian giants unravelling their power in coming decade.

    They are already fit in their existing outsourcing formula. Going forward u will see many different such formulas clicking for them.

  14. Tim Sullivan says:

    This is not news. BRIC has been a stedy out performer. Where are your investment choices for this (asset class)? There is the HSBC holdings BRIC freestyle fund closed to new investors and then there is the Schroder Bric fund that operates off shore in the international market. You could at least have given some examples of some emerging market mutuals of CEFs that are overweight the group. ie NBITX, now closed, maybe ?

  15. tonto says:

    The bulls are wiping out you permabears!!!!!!!!!

  16. randv says:

    While this is not news, there have not been many choices that gives you the right exposure to BRIC countries. For e.g. the latest addition to the BRIC ETFs EEM claims to be 100% BRIC but has 42% exposure to Brazil which I think is too heavy. Check out my post on various BRIC funds and their country exposure.

  17. randv says:

    Barclays recently launched an Exchange traded note based on Bombay SENSEX index. Ticker INP