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Unfortunately, There's an "I" in BRIC (and a "C")

by: Bespoke Investment Group June 05, 2008 | about stocks: BIK / BKF / EEB / EWZ / FXI / IFN / RSX    

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"Give me a BRIC...hold the I and the C" is an order many BRIC investors would have loved to have made over the last six months.  While BRIC (Brazil, Russia, India, China) has a huge investor following, India and China have done nothing but go down over the last half year. 

As shown in the chart below, Brazil is up 9% and Russia is up 7% since early December, while India is down 21% and China is down 31%.  If things don't begin to turn around for the two laggards soon, we'll probably start seeing just "Brussia" ETFs.

Bric

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This article has 23 comments:

  •  
    Jun 05 08:37 AM
    I would appreciate if you write with more insight on what are the reasons for these market downturn. Based on the article, it looks like you are recommending to dump Chindia stock and just concentrate on Brussia. How long can this phenomenon continue?

    At present, the growth is Brussia is based on Energy and Materials (applies only to Brazil). As the oil bubble breaks, these stocks would experience tremendous pressure. In addition, these Brussia stocks are having a ball right now which is because of weak dollar. Once the dollar becomes strong these stocks would be under pressure. Along with this hyper-growth, they are also having rising inflation.

    What does this mean to Chindia? They are experiencing the same cost pressure escalation that US is experiencing. The stock market is undergoing a much-needed correction. As the oil price stabilizes, there would be more stability in the stocks. If the dollar appreciates, that would benefit these economies.

    The Chinese economy is totally dependent on US market. So when dollar appreciates, it affects Chinese stocks. Indian software imports and BPO service markets are experiencing tremendous pressure because of weak dollar. The long-term picture for these 2 countries are still very healthy and GDP growth is well over 8%.

    Consumption within these economies are going to grow tremendous which is going to spur more growth in these markets. Bernake has already mentioned the need for a stronger dollar. Once this happens, the pendulum would be shifting towards China & India.

    While infrastructure growth has been tremendous in China, India offers a huge opportunity for massive improvements in infrastructure. Once there are more infrastructure boom begins, it would generate an additional 2% of GDP which would be in addition to 7% GDP growth. So these 2 markets offer compelling value proposition

    So you cannot stay away from these economies. This would be a good time to take position in these markets. As oil bubble burst, you want to transition from Brussia to Chindia until there is a correction in Brussia.
    Reply
  •  
    Jun 05 08:53 AM
    I am appalled by the quality of your insights. If this is the quality of insights, god help your subscribers who rely on your so-called buy-high sell-low strategies.
    Reply
  •  
    Jun 05 09:02 AM
    I am appalled by the quality of your article. You claim to offer premium advice to your subscribers. If buy-high, sell-low is your way of recommendation, this article is a good example of that. God help your subscribers.
    Reply
  •  
    Jun 05 09:24 AM
    This blurb is valueless as no insight is provided. Delete.
    Reply
  •  
    Jun 05 09:25 AM
    Arkay's first response was helpful and a catalyst for an insightful debate. The next two postings were superfluous and mean-spirited. They scuttled the chance of any meaningful discourse.
    Reply
  •  
    Jun 05 09:44 AM
    The comments seemed to simply be an obervasion and not an analysis or recommendation.
    Reply
  •  
    Jun 05 10:33 AM
    Article was straightforward but needed more backup. would only consider as a general comment until some facts to substantiate the comments was available
    Reply
  •  
    Jun 05 10:36 AM
    Unfortunately, nobody is forcing no one to order BRIC, go concentrate on Brussia. What a waste of space. Good thoughts arkay. Agreed with labrador. Delete.
    Reply
  •  
    Jun 05 10:39 AM
    I believe your charts are revealing and tell the story. They do , of course imply some intelligence on the part of the reader. Please keep them short and to the point as you have been doing.

    What the chart tells me, however is that Russia and Brazil are rolling over.
    Reply
  •  
    Jun 05 10:48 AM
    I appreciated the observation as well. My portfolio has baskets for commodities and emerging markets. I've had Brazil and Russia ETFs in the emerging markets basket; maybe I should move them into Commodities and rebalance from there. Maybe I won't, but the article has given me an idea.
    Reply
  •  
    Jun 05 10:56 AM
    Unfortunately, there is an "R" too. Creeping nationalization (with partial confiscation) accelerated in Russia lately. Stay away!
    Reply
  •  
    Jun 05 11:42 AM
    Not sure why I just wasted the 20 seconds to read this.

    Reply
  •  
    Jun 05 11:42 AM
    I recently bought EWZ. None of you are making me feel good about it.
    Reply
  •  
    Jun 05 12:21 PM
    I like Bespoke's articles.... They don't babble on about which direction the market or stock is moving - They just provide issues to think about.. If you don't like their information, why are you reading it? More importantly, why are you even commenting on it????

    Thx jegan ;-)
    Reply
  •  
    Jun 05 01:48 PM
    I agree with Jegan!
    I love Bespoke graphs. Those who don't like facts can read opinions of so called experts. Bespoke reports facts.
    Make your own conclusions!
    Reply
  •  
    Jun 05 07:27 PM
    All I hear is time to load up on BRIC funds, especially China and India. And that is precisely what I am doing. I missed the beginning of the first boom in China funds and got on board after a 50% rise and still sold in Jan 08 for a tidy 35% net profit. I will NOT miss the beginning of the second go around. I am all in.
    Reply
  •  
    Jun 05 10:50 PM
    It's interesting data, quick and simple. No interpretation attempted. Do your own.
    Reply
  •  
    Jun 06 11:42 AM
    The question is, does the recent weakness in Chindia indicate poor fundamentals or a buying opportunity? I believe that the fundamentals are still pretty solid for those markets and the long-term outlook is good.
    Reply
  •  
    Jun 06 11:51 AM
    As for Russia...

    I think the long-term outlook for this country is much better than many people think. The recent problems that BP (among others) has had indicate that if a joint partnership goes sour, the Russian government and legal system will only support the "home team." Make no mistake, that's a serious problem for any country hoping for foreign investments.

    But, Russia is a much more capitalistic and free place than western (American) newspapers lead us to believe. I have a son living in St. Petersburg, and he knows all about all of the various protests and controversies with respect to human rights etc. He knows about them because he read about them in the local papers and on the freely available Internet. Those are Russian language papers. The population reads those papers, surfs the Internet, and openly discusses all issues.

    That's way different from the Soviet Union, and way different from China or Saudi Arabia today.

    Clearly there are risks, as in any emerging economy, but don't be fooled into thinking this country is going to slide back into Soviet style totalitarianism. There are millions of well informed people living there who would, literally, give their lives to prevent this from happening.
    Reply
  •  
    Jun 09 05:26 AM
    The main problem with BRIC ; its a marketing tool used by the financial institutions.
    After 18 years working for banks (mostly Swiss), I understood one thing very clearly ; banks are experts at marketing.
    If you travel to Brazil, you will quickly find out that it has nothing to do with China or India .....
    But the marketeers .......have to sell you something "fashionable"...
    Now the marketeers came out with "Frontier markets" .......

    Focus on country selection.
    If you are long oil ; then Brazil and Russia make sense.
    If you are long gold , then a south African index is the way to do it.

    Reply
  •  
    Jun 12 03:20 AM
    I also like Bespoke articles. Keep it up.
    Reply
  •  
    Jun 15 04:09 PM
    Like the insights from Bespoke articles, particularly comparative analysis. Though you may not provide reasoning behind it, we will know what kind of trend is shaping up!
    Reply
  •  
    Jun 24 05:41 PM
    Thanks arkay for your insights. I'm down about 8% in IIF and was considering selling this Indian ETF. Think I'll hold into a potentially strengthening USD, after pondering your coments. Am still concerned about the inflation there, however. For the longer term I also appreciated your observation about the potential infrastructure boost as India must do this.

    As for your so called "mean-spirited&qu... remarks, perhaps if more readers were equally candid, worthless articles like this one would be replaced with meaningful information. After all, doing research on the web is time consuming and this article was a waste of time to write and read.

    Thus as you can see, Albert Meyer (posted above), arkay's remarks have not in any way scuddled meaningful discussion. As Jim Cramer points out, this game is about making money, not friends and arkay has made a beneficial contribution to all readers to that end. Thanks again, arkay
    Reply
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