A noted Goldman Sachs economist who originated the term BRICs to group the emerging economies of Brazil, Russia, India and China says that Russia has replaced Brazil as the quartet’s best investment.
Russia now takes the top spot for several reasons, O’Neill said, writes Cullin Roche at Pragmatic Capitalism.
The absence of growth within the G7 countries is driving the allure of BRIC economies, especially as the fiscal challenges that face developed nations are long term. [More Pain Ahead for the Ruble ETF?]
“I mean, I loved Brazil for many years, but nothing ever goes in a straight line. I worry about the real [currency]— it’s far too strong. Very controversially, of the four, I would actually pick Russia right now. I think its got a lot of value and at the margin, they are doing one or two things in a better direction,” O’Neill told Bloomberg. [Checking in on the BRIC ETFs.]
O’Neill is chairman of Goldman Sachs Asset Management.
Emerging economies are growing more attractive to investors with the U.S. and European developed nations still reeling after the financial crisis. [Russia ETF Rallies, Crosses $4 billion Mark.]
Market Vectors Russia ETF (NYSEArca: RSX) is up 4.6% year to date and 26.2% over the past 12 months, according to investment researcher Morningstar. The exchange traded fund has $3.2 billion in assets.
“Russia is one of the more volatile emerging-markets countries: This ETF fell 74% in 2008 and then returned 138% in 2009,” Morningstar’s Patricia Oey writes in a profile of the ETF. “This volatility can be partially explained by Russia’s heavy dependence on oil and gas exports, and this fund’s sector weightings reflect this country’s limited economic breadth. This volatility is further exacerbated by fund flows in and out of Russian equities that tends to follow the rise and fall of oil prices.”
Other ETFs that invest in Russia include:
- SPDR S&P Russia ETF (NYSEArca: RBL)
- iShares MSCI Russia Capped Index Fund (NYSEArca: ERUS)
- Rydex CurrencyShares Russian Ruble Trust (NYSEArca: XRU)
SPDR S&P Russia ETF
Tisha Guerrero contributed to this article.
Read the disclaimer; Tom Lydon is a board member of Rydex|SGI.