With BRIC economies set to dominate the world, how can the private investor take part?
Goldman Sachs coined the term BRIC in 2003, to refer to the economies of Brazil, Russia, India and China -- according to their theory, these countries would eclipse the existing economic powers in a few decades.
And it sounds plausible. As diverse as these four nations are, they all contain elements that could lead to impressive compound GDP growth over a prolonged period.
Looking at current figures, and showing UK data for comparison:
| UK | Brazil | Russia | India | China |
|---|
GDP ($bn) | 2345 | 1068 | 987 | 906 | 2668 |
Population (m) | 60 | 189 | 142 | 1110 | 1312 |
GDP per capita ($) | 38850 | 5660 | 6932 | 817 | 2034 |
Population growth | 0.7% | 1.3% | -0.5% | 1.4% | 0.6% |
GDP growth f'cast (2006-9) (%/yr) | 2.8 | 4.1 | 5.9 | 7.9 | 8.9 |
(data sources: World Bank, HM Treasury)
All well and good, but how can the private investor get exposure to this growth? The easiest and cheapest route is via the iSharesFTSE BRIC 50
(LSE: BRIC)
, an exchange-traded fund ( ETF) that tracks 50 of the largest companies in the BRIC countries. The fund has gained 15% since its launch in April.
But for those who want to be more selective, investing in individual countries or companies may be more appropriate:
Brazil
Brazil's main contribution to this picture is as a supplier of commodities such as iron ore, soybeans, coffee and ethanol. The iSharesMSCI Brazil
(LSE: IBZL)
tracks the MSCI Brazil Index, which is fairly close to Brazil's more commonly quoted Bovespa Index. Both are up about 60% in the past year.
Individual Brazilian shares are thin on the ground on the UK market; one that comes to mind is Clean Energy Brazil
(LSE: CEB)
, which invests in the country's sugar and ethanol industry.
Russia
Russia is another commodity play, as its economy is primarily driven by oil and gas exports. Moscow's RTS Index, which is very heavily weighted towards commodities, is up 30% in the past twelve months. There's no ETF tracking the RTS, but this article includes a long list of Russian companies quoted on AIM. The main market includes secondary listings for the likes of oil company Rosneft
(LSE: ROSN)
, while the aluminium giant Rusal is reported to be planning to float here later this year.
Property plays in Russia include Raven Russia
(LSE: RUS)
, andAFI Development
(LSE: AFID)
.
India
As a supplier of both manufacturing and services, including software, India has a key role to play. There are also resources to be considered, with Vedanta Resources
(LSE: VED)
being a member of the FTSE 100. Other notable Indian companies include Bollywood entertainment group Eros International
(LSE: EROS)
and electricity infrastructure business KSK Power
(LSE: KSK)
.
Trinity Capital
(LSE: TRC)
, and Alpha Tiger Property Trust
(LSE: ATPT)
provide exposure to Indian property.
China
The kingpin of this group is undoubtedly China, with its huge population and competitiveness in manufacturing. The iSharesFTSE/Xinhua China 25
(LSE: IDFX)
covers a selection of companies listed on Hong Kong's Hang Seng Index, with their main operations in mainland China.
For stock-pickers, solar panel producer ReneSola
(LSE: SOLA)
is one of the larger companies, while Griffin Mining
(LSE: GFM)
has been a star performer. ChinaReal Estate Opportunities
(LSE: CREO)
and Macau Property Opportunities
(LSE: MPO)
offer exposure to China's property sector.
Hard-core contrarians would regard the launch of investment funds and ETFs as an indicator that the investment boat has already sailed. It should be borne in mind, however, that the emergence of these economies is a continuing long-term story. Whether that means one should invest at current prices is another question.
If you're interested in investing, why not try The Motley Fool's share-dealing service -- you can buy shares (and ETFs) for as little as £1.50 per trade.
