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| Betting on BRICs rebound |
| Chen Shiyin / May 04, 2009, 00:39 IST |
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Developing economies are proving to be more resilient.
Investors should buy shares in Brazil, Russia, India and China as the markets present the best combination for a recovery in economic growth amid continued volatility, BNP Paribas Asset Management said.
The investment firm turned positive on Russia in March and now holds more shares in the four markets than benchmark indexes suggest, said Martial Godet, who helps oversee the equivalent of $44 billion of assets as Paris-based head of investment management for new markets at BNP Paribas.
The MSCI Emerging Markets Index has jumped 16 percent this year, compared with a 3 percent retreat in the MSCI World Index. Indexes in China, Russian and Brazil have gained at least 25 percent this year, among the 10 best performers in the world, while India’s stock benchmark has increased 18 percent. The four are commonly known as the BRIC markets.
“The recent outperformance of BRIC portfolios is going to continue,” Godet said in an interview in Singapore. “We like the combination of the four countries because China has the resources to finance the stimulation of its economy but at the same time mixing in the commodity side of the investment in Brazil and Russia, and India’s domestic growth.”
A recovery in the global economy, which is currently standing at a low point, will depend on a rebound in the US, Godet said. GDP in the world’s largest economy plunged at a 6.1 percent annual pace in the first quarter, weaker than forecast, the Commerce Department said.
“At this stage, I would not advise a single country investment, given the high level of volatility in the markets and the fluctuation of GDP in the coming months,” he said.
Emerging market growth
Economies in developing nations are proving to be more resilient, with China expanding about 7 percent this year and India growing as much as 5 percent, Godet estimated.
Even after gains this year, valuations for emerging markets remain attractive, Godet said. The MSCI Emerging Markets Index is now valued at 12 times reported earnings, down from a high of 18 times in 2002, according to data tracked by Bloomberg.
Fund inflows are also likely to continue returning to emerging markets as China and other developing nations show signs of recovery, Godet said. Emerging market equity funds had net inflows during the week to April 22, the seventh straight week of gains, according to Cambridge, Massachusetts-based research house EPFR Global.
“There is some value embedded in the emerging markets story,” Godet said. “It is an interesting entry point for long-term investors and the level that we’ve seen over the past six months will be remembered as very attractive in the next few years.”
The author is a Bloomberg News columnist. The opinions expressed are his own
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