Another BRIC in the Wall?
(7/5/2006)
Expatriates are rushing to invest in what is fast becoming the world’s most lucrative quartet of emerging markets. So why are Brazil, Russia, India and China (or BRIC, as the combined markets are now known) are attracting so much attention?
Market analysts have a new darling - four new darlings to be precise. BRIC power is the term coined to describe the combined force of four emerging markets - Brazil, Russia, India and China. Some forecasts for this quartet go so far as to predict them turning into global economic superpowers. It’s looking good for BRIC’s.
Now, no one ever said emerging markets offer a smooth ride. And Russia’s recent shock tactic in turning off the gas supply to neighbouring Ukraine in the spat over prices, caused alarm bells to ring in investors’ ears. Nevertheless, market experts are urging investors to hold their nerve. An investment in any emerging market should be for the longer term and the Russian market, together with the other three BRIC team players, represent nearly 45 per cent of the world’s population. This level of penetration and potential means that these markets will inevitably exercise a dominating influence over global resources, manufacturing and services.
Goldman Sachs first coined this ‘fab four’ BRIC’s. The company is acutely aware of the demographic might of the foursome. `In sheer numbers, it is equivalent to the addition of a new America and Europe to the global consumer class.` In its market report, Goldman Sachs is predicting that by 2025 the BRIC economies’ share of world growth will rise by more than 40 per cent. And their total weight in the world economy is predicted to rise to more than 20 per cent within 20 years. The report also makes the point that the emergence of the BRIC economies has already had an impact on global commodity markets. The huge price rises in industrial commodities is attributed to strong Chinese demand. The next stage will be the impact of the huge emerging middle class in the BRIC economies on consumer goods demand, and, finally, in the longer term we’ll see a significant impact on financial markets.
The big question for expatriates is how should they invest in the BRICs? Should it be through funds which are invested in all four markets? Should it be in single country funds? Or should it be in wider emerging market funds?
Emerging markets are highly volatile - the investing territory of experienced, adventurous and high risk accepting investors. If this is not your profile, don’t get involved. If you feel comfortable with the whole concept of investing in emerging markets research the performance of a number of funds, spread between the options outlined above, tracking their performance, investment styles and fund management teams, and earmarking more closely the market, or markets, you want to take a risk on.
And just to remind you of the value of spreading your eggs across a variety of baskets, it’s worth noting that the best-foreign emerging market in 2005 wasn’t a BRIC, but Egypt, which returned a staggering 127 per cent - that’s twice as high as the best performing BRIC market, Russia, which delivered a return of 63 per cent.
For most expatriate investors, with minimum direct investment levels ranging from US$25,000 to US$100,000 per fund, direct investment into a range of emerging market funds is not an option. So what is the alternative?
The answer is offshore investment bonds. Offshore investment bonds can be accessed with as little as £10,000 (or currency equivalent) and allow the average expatriate investor to access a wide range of investment funds. Most bond providers offer a range of 100 funds to choose from with the investor being allowed to access up to any 10 funds at any one time.
For further information on BRIC funds, other investment funds or offshore investment bonds , just click the ‘contact us’ button below, type BRIC FUNDS in the subject line and submit with your preferred contact details.
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