I think our creitor/ overlords will dance to our tune.
They do not have a choice.
Events of insolvency are overtaking everything.
BRIC down 60%
What if they have blown up? China spent every dime and then some to end up with gigantic cities of empty new condos. And now has cities full of unemployed workers.. oh ya party time.
oil producers blowing up
Russia shut down.
google.com
Brazil in free fall.
Korea will it open tommorow?
India in a world of shit.
Financial crisis: Funds investing in the BRIC economies have plummeted by 60 per cent
Funds investing in Brazil, Russia, India and China have been hit hard by the financial crisis and the stock market falls.
By Rosie Murray-West
Last Updated: 3:56PM BST 24 Oct 2008
Photo: AFP/GETTY If you thought decoupling was something that happened to train carriages then you probably have a lot to be thankful for this month.
For investors, the word denoted an investment theory that saw them pour billions of pounds into risky emerging markets. Economists said that these markets had ‘decoupled’ from the stagnating and debt-ridden Western economies, so that even when everyone else was suffering, the likes of China and Russia would shrug off financial problems.
When the crunch came, however, the decoupling theory vanished in a puff of smoke. The BRIC countries (Brazil, Russia, India and China) were among the hardest hit by a perfect storm of falling commodity prices and global financial collapse.
Investors with funds specialising in these areas have suffered a great deal. If you had put £1000 in Allianz’s RCM BRIC Stars Fund this time last year, you would now have £433. If your focus had been on China, you might have done even worse with the Jupiter China Fund, which would have turned your £1000 into £391.
Is this the end of our excitement over the BRIC economies, or an indicator of value to be had? Some experts believe that now is the time to up your exposure - as long as you are investing for the long term.
Gary Dugan, Chief Investment Officer at Merrill Lynch Global Wealth Management, said that, if you take a long view, BRIC countries have investment opportunities beyond those available in the West.
“In the medium and long term the major emerging economies of Brazil, China, India and Russia will remain the engines of global economic growth. Even today we are seeing the Chinese government acting to maintain momentum with reducing interest rates, tax cuts and infrastructure spending,” he said. “Russia has the potential to rebound strongly when equity markets there settle, and India and Brazil have huge emerging middle classes.”
In the short-term, however, Mr Dugan said that battered UK equities may offer good value, and investors could gain whilst still investing in what they know best.
“Investors can buy UK, US or European equities - all of which have fallen heavily - and expect a return nicely above 10 per cent when markets recover,” he said. “ And they can get this without going further afield to emerging markets they understand less well.”
Perhaps the biggest blow to emerging market fans this week was news that China’s economic growth slowed in the third quarter of the year, slipping into single digits for the first time in four years. After the excitement caused by the Olympic Games in Beijing, the admission from China’s National Bureau of Statistics that “uncertain and volatile factors in the international climate” are “starting to release their negative impact on China’s economy”, fuels fears that Chinese growth is beginning to stutter.
Mining group Rio Tinto added to the negative sentiment by warning of a major slowdown in China. Tom Albanese, the Rio Tinto chief executive, said China was “pausing for breath”, while BHP Billiton, Rio’s rival, also talked of slowing Chinese growth.
Robin Geffen, fund manager at Neptune, who presides over funds in both Russia and China, said that despite this news, China still had potential for economic growth in the next two years “that would be difficult to find in any of the OECD countries”.
He points out that although investors who put their money in a year ago are out of pocket, those who have invested on a longer term basis are not suffering.
“It is about responsibility in marketing as well,” he said. “We have not advertised these funds for over two years. All too often people buy in at a time of maximum performance and maximum highs.”
Over five years, most BRIC funds are still showing a profit. If you had invested 1000 in JP Morgan’s India fund five years ago, you would now have £2436. Gartmore’s China Opportunities Fund would have given you £1676.
Mr Geffen believes there is value to be had in BRIC countries, particularly in China and Russia. “You would be buying into these markets at very cheap historical levels,” he said. “The problems with emerging markets in the past have been that they had very high levels of foreign debt in dollars and now they have high levels of foreign currency. They will also have much higher growth in their economies than the OECD countries.”
If you would like to get exposure to BRIC countries, one of the best ways is through a fund, because it is difficult to hold foreign shares.
Ben Yearsley, at financial advisers Hargreaves Lansdown, said that investors are still buying emerging market funds, even though they have experienced falls of up to 70 per cent. “Many investors are still sitting on a profit if they bought a few years ago,” he said.
“These funds do represent an alternative proposition as a long term investment,” he said. “This is still an exciting area.” He said that although these economies are strong in their own right, the global slowdown will have an impact.
"Ultimately, if the West stops buying or slows down its buying it will have an impact on China and India,” he said. “BRIC economies have also ben hit hard by the fall in commodity prices.They are higher risk than more established markets, but they may offer higher returns in the long run.”
He recommended First State Global’s Emerging Markets Leaders Fund for its stability.
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Of course our creditors/overlords may have something to say about it. |
