The Winners and Losers in BRIC ETFs
December 27th at 4:45pm by Tom Lydon
When looking at the emerging markets, it is hard to ignore the so-called BRICs – Brazil, Russia, India and China. While these countries have enjoyed robust growth rates in the past, the BRIC country exchange traded funds currently show disparate performances.
For instance, India is leading the pack for the past year, with the WisdomTree India Earnings Fund (NYSEArca: EPI) gaining 19.6%, followed by the iShares FTSE/Xinhua China 25 Index Fund (NYSEArca: FXI) rising 16.5% and Market Vectors TR Russia ETF (NYSEArca: RSX) increasing 7.2%. Brazilian markets, though, have not been so strong over the past year, with the iShares MSCI Brazil Index Fund (NYSEArca: EWZ) dipping 2.8%. [Will 2013 be the Year of the BRIC ETF?]
Between 2000 and 2008, these four countries experienced an average annual GDP expansion of 8%, or 6% over the average of the G-7 developed countries, reports Liam Denning for the Wall Street Journal.
However, the International Monetary Fund projects average BRIC growth of 4.5% for 2012, and the spread between BRICs and the G-7 has diminished to 3.1%.
The global market slowdown has hurt the export dependent emerging markets. Prior to 2008, emerging markets saw export growth of 20% to 30% a year, but the problems in the Eurozone and U.S. have forced a cut back in imports.
Looking at the price-to-earnings, Russian stocks are the cheapest, trading at around 6 times forecast earnings, while the others are hovering around 16 to 18 times, compared to the 14 for the S&P 500. Nevertheless, the Eurozone and oil prices weigh on Russian equities.
Brazil, on the other hand, is suffering from lower investments from both the public and private sectors, which account for 19% of GDP. Deutsche Bank believes investments would have to rise to 22% to bring Brazil back to a 4.5% growth rate.
Both China and India would do better with falling commodity prices as the economies grapple with inflationary pressures. India still enjoys a large young population to bolster its workforce. China launched a stimulus packages and will shift away from export growth to domestic consumption.
Broad BRIC ETFs include:
- iShares MSCI BRIC Index Fund (NYSEArca: BKF): up 11.5% over the past year
- Guggenhiem BRIC ETF (NYSEArca: EEB): up 3.3% over the past year
- SPDR S&P BRIC 40 ETF (NYSEArca: BIK): up 11.2% over the past year
For more information on the BRIC countries, visit our BRICs category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. 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.