Thick as a BRIC

Monday, March 06, 2006 | 06:15 AM

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 . . .


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

WSJ, March 6, 2006; Page C1

Monday, March 06, 2006 | 06:15 AM | Permalink | Comments (17) | TrackBack (0) add to | digg digg this! | technorati add to technorati | email email this post



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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?

Posted by: royce | Mar 6, 2006 7:41:15 AM

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