Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
The Hottest Sports Stock Of 2020 - 23rd Sep 19
Stocks Wedge At The Edge – Front And Center - 23rd Sep 19
Stock Market Top Almost Confirmed - 23rd Sep 19
Thomas Cook COLLAPSE! 300,000 Passengers Stranded, Flights Cancelled, Planes Grounded - 23rd Sep 19
Massive Stock Market Price Reversion May Be Days or Weeks Away - 22nd Sep 19
How Russia Seized Control of the Uranium Market - 22nd Sep 19
Dow Stock Market Trend Forecast Update - 21st Sep 19
Is Stock Market Price Revaluation Event About To Happen? - 21st Sep 19
Gold Leads, Will the Rest Follow? - 21st Sep 19
Are Cowboys Really Dreaming of... Electric Trucks? - 21st Sep 19
Gold among Negative-Yielding Bonds - 20th Sep 19
Panicky Fed Flooding Overnight Markets with Cash - 20th Sep 19
Uber Stock Price Will Crash on November 6 - 20th Sep 19
Semiconductor Stocks Sector Market & Economic Leader - 20th Sep 19
Learning Artificial Intelligence - What is a Neural Network? - 20th Sep 19
Precious Metals Setting Up Another Momentum Base/Bottom - 20th Sep 19
Small Marketing Budget? No Problem! - 20th Sep 19
The Many Forex Trading Opportunities the Fed Day Has Dealt Us - 19th Sep 19
Fed Cuts Interest Rates and Gold Drops. Again - 19th Sep 19
Silver Still Cheap Relative to Gold, Trend Forecast Update Video - 19th Sep 19
Baby Boomers Are the Worst Investors in the World - 19th Sep 19
Your $1,229 FREE Tticket to Elliott Market Analysis & Trading Set-ups - 19th Sep 19
Is The Stock Market Other Shoe About To Drop With Fed News? - 19th Sep 19
Bitcoin Price 2019 Trend Current State - 18th Sep 19
No More Realtors… These Start-ups Will Buy Your House in Less than 20 Days - 18th Sep 19
Gold Bugs And Manipulation Theorists Unite – Another “Manipulation” Indictment - 18th Sep 19
Central Bankers' Desperate Grab for Power - 18th Sep 19
Oil Shock! Will War Drums, Inflation Fears Ignite Gold and Silver Markets? - 18th Sep 19
Importance Of Internal Rate Of Return For A Business - 18th Sep 19
Gold Bull Market Ultimate Upside Target - 17th Sep 19
Gold Spikes on the Saudi Oil Attacks: Can It Last? - 17th Sep 19
Stock Market VIX To Begin A New Uptrend and What it Means - 17th Sep 19
Philippines, China and US: Joint Exploration Vs Rearmament and Nuclear Weapons - 17th Sep 19
What Are The Real Upside Targets For Crude Oil Price Post Drone Attack? - 17th Sep 19
Curse of Technology Weapons - 17th Sep 19
Media Hypes Recession Whilst Trump Proposes a Tax on Savings - 17th Sep 19
Understanding Ways To Stretch Your Investments Further - 17th Sep 19
Trading Natural Gas As The Season Changes - 16th Sep 19
Cameco Crash, Uranium Sector Won’t Catch a break - 16th Sep 19
These Indicators Point to an Early 2020 Economic Downturn - 16th Sep 19
Gold When Global Insanity Prevails - 16th Sep 19
Stock Market Looking Toppy - 16th Sep 19
Is the Stocks Bull Market Nearing an End? - 16th Sep 19
US Stock Market Indexes Continue to Rally Within A Defined Range - 16th Sep 19
What If Gold Is NOT In A New Bull Market? - 16th Sep 19
A History Lesson For Pundits Who Don’t Believe Stocks Are Overvalued - 16th Sep 19
The Disconnect Between Millennials and Real Estate - 16th Sep 19
Tech Giants Will Crash in the Next Stock Market Downturn - 15th Sep 19
Will Draghi’s Swan Song Revive the Eurozone? And Gold? - 15th Sep 19
The Race to Depreciate Fiat Currencies Is Accelerating - 15th Sep 19
Can Crypto casino beat Hybrid casino - 15th Sep 19
British Pound GBP vs Brexit Chaos Timeline - 14th Sep 19
Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - 14th Sep 19
War Gaming the US-China Trade War - 14th Sep 19
Buying a Budgie, Parakeet for the First Time from a Pet Shop - Jollyes UK - 14th Sep 19
Crude Oil Price Setting Up For A Downside Price Rotation - 13th Sep 19
A “Looming” Recession Is a Gold Golden Opportunity - 13th Sep 19
Is 2019 Similar to 2007? What Does It Mean For Gold? - 13th Sep 19
How Did the Philippines Establish Itself as a World Leader in Call Centre Outsourcing? - 13th Sep 19
UK General Election Forecast 2019 - Betting Market Odds - 13th Sep 19
Energy Sector Reaches Key Low Point – Start Looking For The Next Move - 13th Sep 19
Weakening Shale Productivity "VERY Bullish" For Oil Prices - 13th Sep 19
Stock Market Dow to 38,000 by 2022 - 13th Sep 19 - readtheticker
Gold under NIRP? | Negative Interest Rates vs Bullion - 12th Sep 19
Land Rover Discovery Sport Brake Pads and Discs's Replace, Dealer Check and Cost - 12th Sep 19
Stock Market Crash Black Swan Event Set Up Sept 12th? - 12th Sep 19
Increased Pension Liabilities During the Coming Stock Market Crash - 12th Sep 19
Gold at Support: the Upcoming Move - 12th Sep 19
Precious Metals, US Dollar, Stocks – How It All Relates – Part II - 12th Sep 19

Market Oracle FREE Newsletter

How to Invest in the Esports Revolution

Getting the Most Bang for Your BRIC Emerging Market Investments

Stock-Markets / Emerging Markets Jul 27, 2009 - 05:57 PM GMT

By: Kurt_Kasun

Stock-Markets

Best Financial Markets Analysis ArticleAt the end of the trading week  a Bloomberg article appeared titled “BRIC IPOs Show Region’s ‘Growing Power,’ Biggs Says,”  where famed investor and former Morgan Stanley chief global strategist Barton Biggs acknowledges that “clearly the BRICs are the big growth areas of the world.” 


Let’s see how the recent excitement about US stock markets’ move into positive territory stacks up against this year’s performance of the BRIC countries:

Not only are the BRICs on a tear, but the US dollars pain appears to be the BRIC markets’ gain as illustrated in the graph below:

Courtesy:  US Global Research http://www.usfunds.com/docs/alert/alert_print.asp

The 10% fall in the dollar is even greater than this year’s 8.4% gain in the S&P500.  The lyrics of the pop song by the group Mims come to mind… “This is why I’m hot, and this is why you’re not…”  While US exporting multinationals should benefit from a declining dollar, their gains pale in comparison to the potential for the BRICs and other emerging markets (particularly the commodity-based countries) to continue their surge. 

Some key questions investors looking to participate might consider:

  1. What portion of my portfolio should I allocate to the “BRICs”?
  2. Are the bulk of the BRIC equity gains behind them?
  3.  Will lagging US performance eventually catch up?
  4. How does one invest in the “BRICs”?

As each individual investor’s situation is unique, they should consult their financial advisor in answering all of those questions, but I will take a stab at some general guidance regarding the fourth point.

There are three primary ways to invest in BRIC country equity markets:

  1. Buy individual stocks (either through a country market exchange or an American Depository Receipt (ADR) in the US).
  2. Buy an Exchange Traded Fund (ETF) (either a series of country ETFs – Brazil, Russia, India, China – or one BRIC ETF such as EEB or BIK).
  3. Buy shares in a BRIC mutual fund (same as with ETFs—either purchase 4 mutual funds representing each of the BRIC countries or one mutual fund with all of the BRICs).

For most people, my general preference is option 3, and just buying shares in one BRIC mutual fund.  You should look for a solid manager with a strong track record.  The BRICs are still emerging markets and are highly volatile.  Many fund managers are quick to point out that these markets are highly vulnerable to 15-20% corrections.  This makes their experience and expertise all the more valuable.

Moreover, the relative valuation of one BRIC nation versus another moves like a pinball and presents opportunities for the most skilled managers.  For instance, India’s market shot up as the result of their recent elections.  India’s stock market has experienced its biggest gains since 2003 and this potentially represents an “overshoot”.  India’s market multiple of 16 still trails China’s 19, but is more than double Russia’s which stands at 7.  Two recent articles in financial media publications extol the virtues of putting money to work in Russia.  In the August 3 edition of Forbes Richard Morais authors a very well-written piece “The Russian Bear’s Bull” -- the tagline is “Russia, the ugly stepsister of emerging economies, has plenty of promise for those who can stomach the wild ride.”  I was surprised to learn that Russia had the world’s third largest foreign exchange reserves and that their total market capitalization of just under $500 billion was on par with Pakistan’s and Jordan’s. 

In this weekend’s edition of Barron’s an interview with Arjun Divecha, manager of GMO Emerging Markets III Fund, (“The Four Cheapest Plays in Emerging Markets”) reveals that he is currently “overweight” Brazil and Russia and underweight China and India.  He lays out strong reasoning to make his case.  The point is not that investor’s should ‘go long’ Brazil and Russia and ‘short’ China and India.  Rather, they should rely on the expertise of experience professionals.  If you are learning this in the financial media, it is likely that fund managers are one or two steps ahead (and will remain so).

One last point:  Because the opportunities for skilled fund managers to exploit these highly-fluid country valuations are rampant, their active management is likely to produce better results than a mostly fixed allocation which an ETF or close-end fund offers.

Bottom Line:  Stick to the experts in trying to get the  most bang for your BRIC.

By Kurt Kasun

A contributing writer to GreenFaucet.com , Kurt Kasun writes a high-end investment timing service, GlobalMacro, which is focused on identifying opportunities that produce returns in excess of market with reasonable risk. He is strategically located in Washington , D.C. , a key to maintaining contacts and relationships which help Kurt understand global policy and economic factors as they emerge. His investment approach has always been macro in nature largely due to his undergraduate studies at the U.S. Military Academy at West Point (B. S. National Security, Public Affairs, 1989) and his graduate studies at George Mason University (M.A. International Commerce and Policy, 2006).

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Kurt Kasun Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Leeb Group
28 Jul 09, 14:55
BRIC Investing

Investors seeking BRIC exposure can also look to companies with stakes in emerging economies to outperform the market over the coming years. A company need not be headquartered in an emerging market to benefit from the rapid growth that countries like China and India are experiencing in the face a global economic slump. Intel, Coca Cola, and Procter & Gamble are all examples of multinational firms that have exceeded expectations on the back of their significant business ventures in emerging markets. While actively managed mutual funds may fit the bill for BRIC investing, well chosen equities can provide excellent returns as well. –www.leeb.com


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules