Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Is it Time to Double Up on Brazil in your BRIC Portfolio?

Stock-Markets / Brazil Apr 11, 2007 - 12:20 PM GMT

By: Michael_K_Dawson

Stock-Markets

BRIC is becoming a fairly common acronym amongst investors.  The term was coined in a research paper by Goldman Sachs in 2003 to describe an economic block composed of Brazil, Russia, India and China.  The combination has the potential to be larger than the G6 in US dollar terms by 2050. Since the paper's release, investors have been scrambling for ways to leverage this theme.  Last fall, Claymore introduced the first BRIC ETF (EBB). 

Before the Claymore ETF, the easiest way to invest into the theme was to use country specific ETFs.  In the past, I have used EWZ (Brazil), TRF (Russia), IFN (India) and FXI (China) to capture the trend. An advantage of the country ETF approach is the ability to specify your own weighting for each country versus being locked in to Claymore's weighting. 


The results of this basket approach have been quite impressive.  In 2006, an equal-weighted basket of EWZ, TRF, IFN and FWI returned 49% not including dividends.  The basket was just as rewarding in 2005 with a 33% return.  However, the wheels have fallen off this year.   As of April 6, the basket is down -6.2%.  What happened? 

China has taken much of blame for the February 27 melt-down, so it must surely be the culprit.  To no surprise, FXI is down -4.0%.  However, the brunt of the basket's poor performance lies with TRF and IFN down -16.1% and -14.2% respectively.  EWZ is the only one in positive territory up 9.4%.

IFN started underperforming the Bombay Stock Exchange towards the middle of last year and has continued in 2007.  Improving the basket's performance may be as simple as replacing IFN with a better proxy for India.  Barclays introduced IPath India MSCI Exchange Traded Note (INP) in December.  An Exchange Traded Note is essentially a hybrid between a bond and an ETF.  INP is tracking the Bombay Stock Exchange much better than IFN.

Continuing with this line of thinking; maybe there is a better Russian proxy available.  Unfortunately, there is currently no way to get direct exposure to Russia through an ETF.  TRF is comprised of Eastern Europe and Russia.  The only other options are the Central Europe and Russia Fund (CEE) and the Morgan Stanley Eastern Europe Fund (RNE).  An ETF specific to Russia is soon to be launched by Van Eck. 

Modifying the basket to include IFN and CEE along with EWZ and FXI could possibly improve its performance going forward.  However, what's more intriguing is adjusting the weighting of the ETFs.  What if we doubled up on EWZ?  Obviously hind sight is 20-20, but a basket that included 40% EWZ, 20% CEE, 20% INP and 20% FXI would be up 1.2% versus -6.2 for the original basket.

The Brazilian ETF is significantly overweight Energy and Industrial Materials.   I expect that the Russian ETF will be likewise.  China and India desperately need natural resources to support their infrastructure build-out.   The addition of the Russian ETF and the ability to dial-in each country's weightings will create some exciting possibilities for BRIC opportunist.

 

By Michael K Dawson
http://www.thetimeandmoneygroup.com/

Copyright © 2007 Michael K Dawson
Michael K Dawson founded the Time and Money Group with the aim of educating and sharing 20 years of experience on how to reach financial freedom. "Financial Freedom is freedom to focus on what is truly important to you and your family without having to trade time for a wage. It is enabled by a portfolio of income producing assets, managed by you, which generates sufficient income to cover your yearly expenses on an ongoing basis. It provides both time and money". The intent of his website is to become a repository of information to put you on the fast track to becoming financially free. For further infromation visit http://www.thetimeandmoneygroup.com/


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

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