Saturday, November 21st, 2009

Special Report: Hit the BRICs for a Global-Investing Double Play

Aug 1st, 2008 | By Martin Hutchinson | Category: Emerging Markets

If you’re a global investor looking for global profits – including one potential way to double your money – you need to “Hit the BRICs.”

Back in 2003, the Goldman Sachs Group Inc. (GS) – eager to push its clients toward emerging markets investment – created the acronym “BRIC” to stand for Brazil, Russia, India and China, the four emerging markets the investment bank’s strategists believed would become a dominant part of the world economy in the years ahead.

What started as a marketing ploy is now a profit play that global investors have to consider, since at least three of the four countries – Brazil, China and India – feature sound economies with powerful growth rates, and stock markets with reasonable valuations.

In fact, China and India are two of the fastest-growing investable economies on the planet, and have been transformed into global leaders in both the manufacturing and service sectors. At the same time, Brazil and Russia each has become a cornucopia of commodities, and are emerging as global leaders in the white-hot global energy sector.

These newfound global strengths have provided all four of these countries access to massive amounts of capital, a key element of the investing methodology in both Money Morning and The Money Map Report.

With foreign reserves of $1.68 trillion, China basically has all the capital it needs for the development projects it has on the drawing board. India has nearly $300 billion in foreign capital invested in its stock market; and that virtually guarantees it will remain on global investors’ radar screens for the foreseeable future.

After conducting this analysis, we decided to develop “The BRIC Report,” a periodic feature we’ll use to update you on both the latest developments, and the latest profit plays, in each of the BRIC economies and BRIC stock markets.

Building Profits, BRIC by BRIC

While the BRIC countries are by no means the world’s only attractive emerging markets – from time to time, in fact, the BRIC markets may become overpriced or their growth prospects may ebb – over the long haul, these markets remain strong opportunities for investors, and should remain at the top of your list of profit plays. Here are the four top factors why this is true.

  • Population: The four BRIC markets are the largest economies and have some of the largest populations among emerging-market countries (which don’t include such already-emerged East Asian markets as Japan and South Korea). Companies from BRIC countries have large-and-competitive domestic markets, meaning they’re already globally competitive when they venture abroad.
  • Rapid Growth: China and India have two of the fastest growth rates in the world, and that looks likely to continue. Other rapidly growing countries are much smaller – and more risky.
  • Natural Resources: While China and India are the major poles of global manufacturing and service growth, the two other BRICs – Brazil and Russia – are cornucopia of commodities and energy, which in the past have been inadequately exploited. The escalating energy and commodity prices of the last five years have brought rapid growth to both countries, enabling them to develop active consumer sectors with a multitude of investable companies.
  • Access to Capital: Brazil recently achieved an investment grade debt rating from Standard and Poor’s Inc., giving the Latin American country access to the major global pools of institutional capital, while also significantly lowering the cost of its debt. Russia has built up foreign-exchange reserves of more than $400 billion, allowing it to break free of a reliance on foreign capital. China, with a record $1.68 trillion of foreign exchange reserves, has access to all the capital it can handle. Finally, India may finally have broken out of the cycle of foreign exchange constraints that had previously prevented rapid growth: With foreign capital of almost $300 billion invested in its stock market, it is very much on investors’ radar screens worldwide.

Let’s take a look at the markets one at a time.

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By Martin Hutchinson

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About the Author

Martin HutchinsonMartin O. Hutchinson is a Contributing Editor to both the Money Map Report and Money Morning. An investment banker with more than 25 years experience, Hutchinson has worked on both Wall Street and Fleet Street and is a leading expert on the international financial markets. Hutchinson earned his undergraduate degree in mathematics from Cambridge University, and an MBA from Harvard University. He lives near Washington, D.C.

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Money Morning is the leading source of investment research on the global markets. Its free daily service provides news, research, investment opportunities and insights on international investing -- most of it well before it appears in the mainstream financial media.

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