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Looking for the BRIC in the Wall


Apr. 5 2016, Updated 12:41 p.m. ET

The advent of BRIC

The acronym BRIC became a part of the financial vocabulary after Jim O’Neill of Goldman Sachs coined it in 2001. It stands for Brazil, Russia, India, and China, which were identified as the economic powerhouses of the future. For a while, all four were justifying the label, not only in economic terms but also in the way their financial markets were attracting and rewarding investors at different points in time.

However, since early 2015, the picture for these nations has not looked quite as pretty. A variety of incidents and developments have led to the loss of investor confidence in these economies.

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BRIC under stress

Signs of economic trouble had started emerging for Brazil well before 2015. The commodities slump that snowballed in 2015 hurt the Latin American nation badly. Political instability, a corruption scandal (PBR), and a slowdown in China—a major trading partner—has just worsened things for the country.

Russia faced political opposition and sanctions due to its stance on Ukraine. As a crude oil exporter (LUKOY) (SGTZY), Russia’s economy was hit as energy prices fell in 2015 and carried the downward momentum in the first six weeks of 2016.

Comparatively, India looked healthier among all the BRIC members. However, the reform process expected from the government elected in 2014 was slower than foreign investors had anticipated. This, coupled with worries about aggressive rate hikes by the US, has led to foreign investors fleeing Indian equities.

China’s (YINN) crucial place in the world economy and financial markets was on display in mid-2015 and then in 2016 as worries about an economic slowdown, devaluation in the yuan, and structural reforms undertaken by the government directed market movement around the world.

In this series

In this series, we’ll look at how the active and passive funds focused on the BRIC nations (TCWAX) have performed across various periods. We’ll also look at the broad macroeconomic picture of these nations and see which key drivers can play a role in shaping their economy for the rest of 2016.

We’ll begin the analysis with the troubled Latin American giant: Brazil.


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