Resurgent BRIC winning global race for investments

by Dave

Latin America’s future is with selling to Asia, and courting investment from there. India is probably 10-12 years behind China in its relationship with LatAm – its trade levels with the region, about $11 billion now, are equivalent to what China had in the year 2000. With India, LatAm’s bigger opportunity is to court investment in agriculture and energy, and where technology/Intellectual property can be transferred – in IT, light engineering etc.

The world’s four biggest emerging economies are grabbing growing volumes of global capital flows, with firms and fund managers increasingly viewing Brazil, Russia, India and China (BRIC) consumer demand as a high-return, relatively safe investment bet.

BRIC, with 40% of the world’s population, account for about 20% of its gross domestic product, a share Goldman Sachs says will rise to equal that of the G7 industrialised countries as early as 2032.

There was a sign this year of the shape of things to come as China overtook the United States as the world’s biggest car market. And as incomes of 2.5 billion people steadily rise, company profits as well as stock markets will feel the effect.

We are betting on the largest, highest-growth markets with the biggest populations and good liquidity levels.“Already, BRICs are outgunning broader emerging stocks — the MSCI BRIC index is up 90% in 2009 versus 70% for MSCI EM, with only China lagging.

An investment in Brazilian stocks in 2000 would have quadrupled by now while cash put in emerging stocks would merely have doubled. And a buyer of world stocks would have lost money.

Fund managers say cash will go where growth is — or where the value is. With China and India posting the highest growth in the world, and Russia trading at a 40% discount to emerging markets, the bloc should remain an investment magnet.

Consumer demand is seen as key to the post-crisis global recovery, and at the heart of the BRIC story is the consumer.

This is the main driver behind the surging tide of direct investment into the BRICs which took in 16 percent of global direct investment flows in 2008. This is a third up from the previous year, a total $265 billion, or over half of what was received by the 16-nation European Union, United Nations agency UNCTAD says.

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