Archive for the ‘BRIC’ Category
India’s New Year
Last year I had some clients in Indian equity, always a consideration and comparison to China. India had a pretty good 2010 and China equity faltered. India’s main stock index, the Sensex, gained 17% last year, and the country’s market cap as a percentage of world market cap increased more than any other country except Canada.
This year seems different. After a small gain of 0.25% on the first day of the year, the Sensex has gone down for all except one day since for a year-to-date decline of 7.90%. The chart below from Bespoke Invest shows the index made a lower high on its most recent rally, and tested its late November intraday low.
I have been noticing this since I read the article on 11th Janurary. The November lows didn’t hold, the technicals will turn decidedly bearish.
Adapted from “India Struggles Out of the Gate” published on Tuesday, January 11, 2011 in bespokeinvest.com
What Makes Brazil An Attractive Investment.
Many investors have heard about investing in BRIC, which is the well-known acronym for Brazil, Russia, India and China. Economists have determined that BRIC countries could rank among the world’s dominant economies by mid century based on gross domestic product. Some important growth factors in these countries are the huge reserves of natural resources and a large and well-qualified work force with relatively low wage levels. A growing consumer demand stimulated by increases in income across broad categories of the large BRIC population is also an important factor.
Due to proximity and racial demographics, we are more knowledgeable about China’s economy; similarly for India. Many investors have invested in Brazil through BRIC funds and emerging market funds, but know very little about the country. Same goes for their Financial Advisers. I’m going to present some basic facts an investor should know about Brazil here.
GDP
Brazil’s GDP now stands at $2.0 trillion, the 8th-largest economy in the world, compared with China’s $5.7 trillion, $1.5 trillion for Russia, $1.4 trillion for India, $2.1 trillion for Italy.
Currency
Brazilian Real has appreciated against the USD about 6% year to date. 1.70 BRL = 1 USD
Foreign Reserves
US$285.7 billion in November 2009
Equity Market
Brazil usually has the highest weighting in Latin American equity funds.
The Bovespa Index is a total return index weighted by traded volume. It’s made up of about 50 of the most-liquid stocks traded on the BM&FBovespa. The portfolio is rebalanced three times in a year. Total market cap is US$1.27 trillion as of August 2010.
As at 13 April 2010, Petrobras (Brazil’s largest oil producer) and Vale (the world’s second largest mining company) are the key players and they account for over one-third of the market capitalisation in the Bovespa. Steel maker Gerdau is also among heavily weighted resource stocks
Outlook
What concerns investors is usually outlook of the equity market, unless the investor is investing in Real denominated bonds, which is unlikely.
BRIC Performance
April 23rd was a peak for equity markets. The market has fallen quite substantially from there, which I’m inclined to believe is a correction and a price-in of slower growth in the world economy with the problems in Europe, tensions in Korea, Chinese property assets inflation fears, slower than estimated increases in jobs in US.
Chart below shows the performance of the BRIC (Brazil, Russia, India, China) countries since the 4/23 peak. India (Sensex Index) has held up the best by quite a bit with a decline of just over 5%. Brazil’s Bovespa Index is down at -11.2%. China’s Shanghai Composite is down 15.8%, while Russia’s RTS is down the most at 16.4%. US’ S&P 500 is right in middle with a decline of 12.8%.
While the US and China have just moved to new correction lows, Russia, Brazil, and India are all above the lows they made in late May.
Adapted from Bespokeinvestment Group at www.bespokeinvest.com
