only major stock markets recording gains of >8% this year are China, Russia and Brazil, and the benchmark index in India is little changed. That's a sign that the countries, the so-called BRICs, are showing resilience unimaginable in the United States, most of Europe and Japan these days.
Wee l, we need to remind Elroy of the D word...
As speculators holding bags wait for their final downfall, and governments get ready for a decade of Japanization...
Now those huge amout of Euro and USD printed will find a safe home...
As world equities slump, so-called BRICs provide a bright spot
By Michael Patterson Bloomberg NewsPublished: February 12, 2009
LONDON: The only major stock markets recording gains of more than 8 percent this year are China, Russia and Brazil, and the benchmark index in India is little changed. That's a sign that the countries, the so-called BRICs, are showing resilience unimaginable in the United States, most of Europe and Japan these days.
While the evidence varies among the largest developing nations, there are indications that consumers there have not gone into hibernation just yet.
In China, a 4 trillion yuan, or $585 billion, stimulus plan is expected to help. Prospects that demand will hold up for metals have lifted shares of Vale do Rio Doce in Brazil by 27 percent this year through Wednesday, and Severstal in Russia by 65 percent.
"I would expect the big emerging markets to do really well in the updraft of the next bull market, which you ought to be postured for right now," said Ken Fisher, the billionaire chairman of Fisher Investments in Woodside, California, which owns Brazilian and Russian shares.
The Shanghai composite index has rallied 24 percent this year, the biggest advance among benchmark equity indexes worldwide. In Russia, the Micex has jumped 17 percent and the Bovespa in Brazil has added 8.8 percent, data compiled through Wednesday by Bloomberg show.
Today in Business with Reuters
Europe's economic slump deeper than expectedU.S. House approves $787 billion stimulus billWithout a cure for toxic assets, credit crisis will persistThe Bombay Stock Exchange sensitive index has slipped 0.3 percent, still the fourth-best performance among the world's 15 largest markets.
The Standard & Poor's 500-stock index has declined 7.7 percent through Wednesday as bank shares have tumbled. The Dow Jones Stoxx 600 index in Europe has fallen 2.6 percent, and the Nikkei 225 stock average in Japan has dropped 10 percent.
Still, while the BRICs are off to a promising start, Jason Hepner, a global strategist at Standard Life Investments in Edinburgh, said he believed it was too early to buy shares because valuations have not fallen enough to compensate for the risk that the global recession would last longer than investors expect.
China's exports had the biggest decline in almost 13 years last month on slumping demand in the United States and Europe. Brazil's economy may have stalled in the fourth quarter, as industrial output tumbled the most since 1992, government data show.
The Russian Economy Ministry forecasts the country will fall into the first recession since its 1998 debt default, largely because of the steep slide in the price for oil - one of its main exports. The ruble's 16 percent tumble against the dollar this year has also pushed up financing costs for Russian companies.
"We need some reassurance in the global growth outlook or we'd need valuations getting to absolute extremes where we felt that any future bad news was already priced in," Hepner said. "Neither of those conditions have been met."
Emerging-market shares sank more than developed-market equities last year. The Shanghai index tumbled 65 percent and traded in November at 13.2 times reported profits, the lowest level since Bloomberg began tracking the data in 1997.
Yet the gauge was valued at 17.6 times earnings Wednesday, a rebound of 32 percent from its 2008 low.
"China is already getting out of the bottom," said Lode Vermeersch, chief investment officer of KBC Goldstate in Shanghai, which has been buying Chinese shares since October.
A two-month rebound in the purchasing managers' index in China, a gauge of manufacturing activity, is fueling speculation that the government's efforts to revive growth are working.
"The Chinese have huge amounts of money and big bank accounts and they're now spending it," said Jim Rogers, the chairman of Rogers Holdings in Singapore and author of "A Bull in China: Investing Profitably In The World's Greatest Market."
"China's going to come out of this better than most."
The global recession prompted India's central bank to cut its benchmark interest rate to a record low 5.5 percent, from 9 percent in October. Prime Minister Manmohan Singh's government announced a combined $31 billion of stimulus measures to support growth.
India's economy probably will expand 7.1 percent in the year ending March 31, the statistics office said this month. That compares with the 0.5 percent global growth rate forecast by the International Monetary Fund.
"India's economy stands out when so many others are contracting," said Sandip Sabharwal, chief investment officer at JM Financial Mutual Fund in Mumbai. "We are still seeing strong domestic consumption."
In Brazil, the Bovespa index lost 41 percent last year, sending price/earnings ratios as low as 7 in October before a rebound in the metal producers of the country pushed the ratio to 9.6 as of Wednesday.
"Infrastructure spending requires things like iron ore and concrete and all kinds of industrial materials," said Uri Landesman, the head of global growth and international equities at the ING asset management unit in New York. Brazil is "very long metals and they're going to be a huge beneficiary."
Steel companies in Russia also are rallying on speculation increased infrastructure spending will boost profits, said Constantin Demchenko, head of trading at Everest Asset Management in Moscow.
The BRICs, especially China and India, are still in a "secular uptrend" because their populations and economies are growing faster than developed countries, said Robin Griffiths of Cazenove Capital.
"We're moving from a Western-dominated world into an Asian-dominated world," said Griffiths, the chief technical strategist at Cazenove in London. "And at the margin that's where the growth is even now."
Ruble making comeback
The ruble jumped 2.5 percent Thursday to its highest point this month against the dollar and the euro, as evidence the central bank is defending the national currency prompted investors to aggressively sell foreign currency, The Associated Press reported from Moscow.
In afternoon trading, the euro had fallen as much as 1.2 rubles and the dollar was down 0.8 ruble. It was a fourth straight day of gains for the Russian currency. |
