Posts RSS Comments RSS

Concerns for the BRIC - Growth and returns - Part 3

moneyrelations :: Jan.10.2008

Hello, stranger! New here? How about subscribing to my RSS feed? Thanks for visiting!

Over the past couple of days, I highlighted concerns for investing in the BRIC countries despite their tremendous growth rates.

Part 1 discussed Brazil and Russia, and Part 2 looked at India and China.

It is important to note that there are pros and cons for investing in any country - not just the emerging ones.

Flickr: Say NO to All terrorism; Flickrians for Peace

For example:

Despite the fact that the TSX finished just above 7% for 2007, the Canadian index lacks the breadth and depth of other exchanges. We are in a commodities boom but what happens when the cycle ends? We have a soaring loonie that increases our purchasing power abroad but it is also costing us jobs in the manufacturing sector. We are also prone to the U.S. sneeze effect. And heck, even though things have quieted down in recent years, there’s always the shadow of Quebec separation.

To put it in perspective, Canada isn’t without risks either as a developed nation - albeit the risks are lower along with a muted growth potential.

Therefore, I have to ask myself: is the higher growth of the BRIC countries worth the higher risks? Does higher growth equate to higher returns? Is there still value in these countries after huge inflows of foreign money bolstering their exchanges and currencies?

To bring balance to the issue, here are two articles from the financial industry arguing for and against the BRIC.

From Goldman Sachs - Dreaming with BRICs: The Path to 2050

Higher growth may lead to higher returns and increased demand for capital.

From William Berstein - Thick as a BRIC

growth stocks have lower returns than value stocks, so do growth nations have lower returns than value nation

I believe one of them is right. The question is, which one?

Investing :: 10 Comments »

Did you enjoy the post?

Subscribe to Money Relations and the Comments as well.

Share in Social Media

StumbleUpon: Concerns for the BRIC - Growth and returns - Part 3 del.icio.us:Concerns for the BRIC - Growth and returns - Part 3 digg:Concerns for the BRIC - Growth and returns - Part 3 reddit:Concerns for the BRIC - Growth and returns - Part 3 Y!:Concerns for the BRIC - Growth and returns - Part 3

Related Posts:

10 Responses to “Concerns for the BRIC - Growth and returns - Part 3”

  1. on 10 Jan 2008 at 11:51 pm1Steve

    Very interesting series on BRIC investing…I had heard the term before in passing, but never searched to find out what it stood for. I appreciated how you made it fairly easy to understand, as someone who doesn’t know much about paper investing, and what to look for in markets. Thanks for the bit of education.

  2. on 11 Jan 2008 at 1:02 am2moneyrelations

    Hi Steve,

    What a nice comment :)

    As you can see, I’m just learning as I go along as well - just a light and easy read and hopefully informative as well.

    Thanks for dropping by!

  3. on 12 Jan 2008 at 3:09 am3Invest with Dax

    I made 80% in my India Infrastructure Fund last year. That wildly exceeded my expectations. This year may see muted growth as I believe there will be a global decrease in growth, most notably in my U.S.A. Strategy? Well if you are in a “hot” market and fear a cool down, take some money off the table. I plan on letting my profit ride for 2008 and diversify the rest into some other markets. Most people look at BRIC, but I’d also look at the ancillary markets to the BRIC countries. Look at places like Singapore, Malaysia, and look at other countries in South America. If you have the risk-tolerance look at Venezuela for example. By the way my favorite BRIC stock right now is Petrobras.
    (I hold no stock in Petrobras nor do I own any of the aforementioned countries, yet)

  4. on 12 Jan 2008 at 9:05 pm4moneyrelations

    Hey Dax,

    I like the last sentence, “yet” :)
    I think a goal for me this year is to just clean up my portfolio and reevaluate my allocation. I know I hold a lot of these countries already.

    By doing some cleaning, that in itself will save me money by streamlining costs.

    I hear ya on the ancillary markets as they look intriguing. I’ve just been “BRICed” to death. Another acronym, please.

  5. on 12 Jan 2008 at 10:01 pm5FourPillars

    Thanks for the interesting series.

    Mike

  6. on 12 Jan 2008 at 11:12 pm6moneyrelations

    Thanks a lot, Mike. That means a lot coming from a great PF blogger I admire :)

    And maybe one day, I can p.o. an email subscriber too! ;)

  7. on 13 Jan 2008 at 8:16 am7ChampDog

    This is very interesting post. Thanks for the sharing. I wonder why Vietnam is not included? I think Vietnam has a great potential too.

  8. on 13 Jan 2008 at 11:16 am8moneyrelations

    Hey ChampDog,

    I had heard in passing that Vietnam has great potential too but I didn’t research on it.

    Can you give us any insight on why you like it?

    I keep on referring to this Economist article because I think it gives a good overview of other emerging markets.

  9. on 14 Jan 2008 at 7:09 pm9FourPillars

    Thanks for the compliment!

    As far as p.o. an email sub - your time will come!! :)

    Mike

  10. on 15 Jan 2008 at 12:00 am10moneyrelations

    I have yet to unleash my natural snarkiness on my blog yet, but it’s there ;)

Trackback this post | Feed on Comments to this post

Leave a Reply