The BRICs theme is coming apart.
The idea of owning Brazil, Russia, India and China stocks as though they’re some sort of special grouping or separate asset class is losing credibility among investors at an alarming rate.
Here are two must read takes on why this is the case and what to do about…
First, the creator of the acronym himself, former Goldman chief economist Jim O’Neill revisits the topic for Financial News:
As we approach the 12th anniversary of the time I dreamt up the acronym Brics (Brazil, Russia, India and China), and the 10th anniversary when my colleagues and I took our first look at which economies would be the 10 largest in 2050, it is now highly fashionable to regard the whole thing as yet another bubble-type notion.
One analyst popularised another meaning for the acronym: Bloody, Ridiculous Investment Concept. I have also read a respected journalist saying that this year the developed world will contribute more to global gross domestic product than the broader emerging world, and that investors appear to be deserting emerging markets in droves.
There’s also an important post at MarketWatch today by Mark Hulbert which warns us not to treat the emerging markets countries as all one monolithic investment:
That is one of the primary conclusions I draw after reviewing what the top-performing advisers I monitor have to say about stocks of emerging markets or BRIC countries (Brazil, Russia, India and China).
After reading what they have to say about these markets, in fact, I came away wondering why we treat “emerging markets stocks” as a single, coherent asset class. Each individual country has always faced idiosyncratic challenges that are unique to it. Why blithely assume that all stocks outside the developed world march to the beat of the same drummer?