Before the dawn of the credit crisis, emerging markets, particularly those of Brazil, Russia, India and China, were powerhouses from 2003 until 2007, and exchange traded funds that invested in those markets earned stellar returns.
But since then, these countries were hit just as hard, if not harder, as the rest of the world. However, some global economies are experiencing growth in their gross domestic product, leaving some to wonder if the BRIC nations once again will stand tall together. Or, as is already happening, will some of these countries bounce back with greater ease than others?
BRAZIL
Brazil has been given a hand by its growing middle class, which has a resilient appetite for consumption. In fact, the country is Latin America’s largest auto producer, and car sales have been rising for four months.
The country is also a net exporter of energy, commodities and agriculture, making it one of the more self-sufficient emerging markets. Brazil has also taken a more meddlesome stance when it comes to its financial sector, which actually wound up helping it as the rest of the world tried to figure out their financial systems.
Investors can grab access to Brazil through the iShares MSCI Brazil Index (EWZ), from
Barclays Global Investors in San Francisco.
CHINA
One of the best success stories of 2007 finally appears to be righting its listing ship. A recent survey of 19 countries found that the Chinese have more economic confidence than the inhabitants of other countries.
A $586 billion stimulus package was put in place this year, and by all accounts, it seems to be working. In the first quarter, improvements in the manufacturing sector were seen, yuan loans hit a record high, and urban fixed-asset investment surged 26.5% in January and February. New industrial activity is beginning to affect other sectors, including shipping, as well as demand for industrial metals such as copper and steel.
Access to China can be found via the iShares FTSE/Xinhua China 25 Index (FXI), also from
Barclays.
RUSSIA
Russia seems to be hitting the skids. The country has long had a dependence on energy and oil. When times are good, they are very, very good for Russia. But when oil is hovering around $50 per barrel, down from its record $147 in July 2008, gloominess sets in.
Consumer confidence has fallen to decade lows, and the ruble has been plummeting. Job losses are accelerating: 2.4 million have been lost since August. Experts don’t expect to see growth in Russia until the end of the year.
The Market Vector Russia ETF Trust (RSX), from New York-based Van Eck Global, is one way to get exposure to the economy.
INDIA
India is a wild card. To be sure, the economy has a lot going for it: Heavy internal consumption and vast intellectual capital are two of its biggest selling points. Even in the face of one of the worst auto markets in decades, the country launched what’s being billed as “the world’s cheapest car”: the Tata Nano. The bargain-basement price means that 65% more Indians will be able to afford a car.
India also has a rapidly growing population and is struggling with finding ways to feed it while remaining independent. The country is also facing political change with a new prime minister and Parliament members.
India is forecast for a scant 5.2% growth this year — great for any developed nation but a drastic slowdown from double-digit growth the country once enjoyed. Can India prevail?
India can be accessed through the WisdomTree India Earnings Fund (EPI), from New York-based WisdomTree Investments Inc.
For those who can’t decide which country ultimately will recover first, there are several broad BRIC ETFs. Be sure to examine the country weightings in each because they vary: the Claymore/
BNY Mellon BRIC (EEB), from Claymore Securities Inc. in Lisle, Ill., the SPDR S&P BRIC 40 (BIK), from
State Street Global Advisors in Boston, and the iShares MSCI BRIC Index (BKF), from
Barclays.
