BRICs vs. Emerging Market ETFs

February 13th at 1:33am by Tom Lydon

Emerging markets have continued to grow over the economic slowdown in comparison to developed markets. BRIC exchange traded funds offer investors another option for those seeking overseas exposure.

“Emerging markets” is the term given to developing nations that can see periods of fast economic growth. They are also known for their volatility relative to developed markets.

Next came the acronym “BRIC” that stands for Brazil, Russia, India and China, created by Goldman Sachs in 2001. [List of Brazil ETFs]

In 2009, these four nations accounted for 42% of the globe’s population and 25% of its GDP, reports Investopedia.

BRIC nations are expected to outpace developed markets growth for years to come, as well as lead the emerging markets arena. The success of these countries is associated with the developed markets of Europe, North America and Japan where the largest demand is based for BRIC services and products. [BRICs Lead Emerging Market ETFs]

A run-down of the emerging economies associated with BRIC, from Patricia Oey, in a Morningstar analyst report:

  • China: China  has a fast-growing middle class that is expected to see stronger purchasing power on the back of rising wages and an appreciating yuan. While economic growth going forward is expected to moderate from the 9% to 10% annual growth over the past decade, China’s growth will certainly outpace that of developed economies.
  • Brazil: Brazil is expected to continue to benefit from strong demand for its abundant natural resources, such as iron ore and agricultural commodities, which has brought significant wealth to the country and strong market performance.
  • Russia: Russia is resource-rich like Brazil, with plentiful oil and natural gas, as well as metals and timber. And in India (8% of the portfolio), the government is working to simplify foreign investment rules to support increased spending on much-needed infrastructure upgrades and overall capital investment. [Russia ETF Rebounds]
  • India: In India, the government is working to simplify foreign investment rules to support increased spending on much-needed infrastructure upgrades and overall capital investment. [India ETFs Rally in 2012]

BRIC ETFs include:

  • SPDR S&P BRIC 40 ETF (NYSEArca: BIK)
  • Guggenheim BRIC ETF (NYSEArca: EEB)
  • iShares MSCI BRIC ETF (NYSEArca: BKF)

Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.