In precisely one month, the 9th BRICS Summit will commence in Xiamen, China. Based upon the current assessment of these five emerging markets, spirits will be high.
Consider this: if you had invested in the MSCI BRIC Index in 2001, as of today, your investment would have performed twice as well as the MSCI World Index.
But it is a mixed bag if you look at the BRICS from a GDP standpoint. Although it is higher than it’s target (6.1%), China’s GDP is at a 25-year low (6.9%). India’s GDP has dipped to 6.1% from 7%, which many attribute to President Modi’s demonetization policies. Brazil is the only BRICS country that is actually contracting, down 0.35%, partially due to China’s falling appetite for their raw exports. Bi-lateral trade between the two countries has decreased by 25% since 2013.
Just as it is in the majority of the world, stagnant or slowing inflation rates are effecting BRICS. India has reached a record low due to falling food prices – but for Brazil, falling to 3% from 11% at the beginning of 2016 is a welcome sign that the recession is ending. Russia is experiencing 4.4% inflation, while their target is .4% lower, and prices are predicted to rise even higher.
If there is one clear takeaway, it is that fund flows are surging back to BRICS. Nearly one year ago flows were negative, but they are now at a two-year peak, with more than 160 billion USD.
Data sources: Bloomberg