LONDON: BRICs still building more than 10 years on
Sep 26, 2012
- 'Continental-sized economies' mean growth story still has far to go
London, 26 September 2012: It is nearly 11 years since the world was introduced to the idea of the BRIC economies – Brazil, Russia, India and China.
The thesis was that the BRIC economies would become increasingly important over the next decade, challenging the relevance of the narrow G7 grouping of developed nations.
This prediction has certainly borne fruit, with the four economies all now in the top 10 globally (measured by GDP at purchasing power parity) and China snapping at the heels of the United States at the very top of the list.
However, this is not the end of the line for the BRICs, as there is still enormous potential for development given their relatively low GDP per capita. China and India, with their huge populations, are still well down the scale of per capita GDP, at $5,430 and $1,489 respectively in 2011, compared with $38,818 for the UK and $48,442 for the US. (All figures from the World Bank Database.)
In many ways the BRICs have made great strides over the past decade, though in other areas they still have far to go. Although in Brazil, the poverty rate halved from 20.2% in 2002 to 10.8% in 2010, 69% of the Indian population were still living on less than $2 a day in 2010. (See the appendix for a comparison of economic and social indicators across the BRICs).
What the BRICs have in common, according to the Far East and Emerging Market Equities teams at J.P. Morgan Asset Management, is that their continental-sized economies offer the scope to fuel domestic-driven growth regardless of what is happening elsewhere in the world. In an environment where the 2008 financial crisis is still casting a long shadow over the US, UK and Europe, this is a significant benefit.
Speaking at a roundtable event in London yesterday, Emily Whiting, Client Portfolio Manager in the Emerging Market Equities team at J.P. Morgan Asset Management, said: “In Brazil, growth expectations have been adjusted downwards. Despite these short-term risks, the equity market has already discounted a lot of bad news, meaning the MSCI Brazil Index trades on a price-to-book valuation of just 1.4x, which is close to its 2008 and 2011 lows. This looks to be an attractive long-term entry point as along with historically low equity valuations, the more competitive currency has raised our expected returns in sterling.
“In Russia, the dividend yield is currently 3.6%, above that of the broader emerging markets asset class, which sends a positive signal about the management approach to shareholders and corporate governance. There are emerging investment opportunities as we see more companies coming to the market for equity funding.”
Pinakin Patel, Client Portfolio Manager in the Far East Equities team, added: “Whilst we may continue to see volatility in both China and India over the shorter term, the long-term structural story remains intact. In China, long-term opportunities are being created as the country rebalances its economy away from being export- and infrastructure-driven towards an economy that is driven by consumer demand. In India, the need for infrastructure and investment across the country, as well as its young dynamic population, with half of its 1.2bn people being under the age of 25, remain drivers of the economy going forward,.”
Given that the BRICs are a heterogeneous group subject to different drivers – for instance, Brazil and Russia are largely resource producers whereas China is a resource consumer – investors with an interest in the BRICs may value the ability to choose which markets to follow – a choice they would not have with a dedicated BRIC fund. J.P. Morgan Asset Management is the only UK asset manager to offer funds investing in each of the individual BRIC markets.
James Saunders Watson, Head of Marketing, Investment Trusts at J.P. Morgan Asset Management, said: “Investors have had access to the JPMorgan Chinese Investment Trust since 1993, and to the JPMorgan Indian Investment Trust since 1994. Whereas, JPMorgan Russian Securities trust was launched in 2002 and JPMorgan Brazil Investment Trust is the newest, launched in 2010. While the BRIC markets can be volatile, over the long term there is the potential for superior returns for investors who are happy with the level of risk. As these trusts are part of our investment trust range, they are all available to private investors through our Investment Account, ISA, SIPP and Junior ISA with minimum investments of £50 per trust per month.”
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Notes to Editors
About J.P. Morgan Asset Management
J.P. Morgan Asset Management is part of JPMorgan Chase & Co. and is a global asset management leader providing world-class investment solutions to clients. With US$1.3 trillion in assets under management (the Asset Management client funds of JP Morgan Chase & Co. as at 30 June 2012) and offices in 41 locations around the world, J.P. Morgan Asset Management offers global coverage with a strong local market presence, and leadership positions in most asset classes.
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Any past performance referred to in this material is not a guide to future performance and the value of investments, and any income from them, can fall as well as rise. Any tax concessions referred to are not guaranteed and their value will depend on the individual circumstances of investors. Stock market linked investments carry a number of inherent risks. These risks will increase where fluctuations in exchange rates impact on the value of any underlying investments or where the investment is exposed to smaller companies or emerging markets. Investments in fixed income securities that are not rated as investment grade represent a greater risk to an investor’s capital.
Haven’t they grown: How the BRICs have developed over the past decade
|GDP (PPP) (current US$)||$1.32trn||$2.31trn||$1.17trn||$3.03trn||$1.83trn||$4.53trn||$3.67trn||$11.35trn||$10.60trn||$15.10trn||$1.71trn||$2.29trn|
|GDP per capita (current US$)||$2,812||$12,594||$2,375||$13,089||$480||$1,449||$1,135||$5,430||$36,819||$48,442||$27,168||$38,818|
|Current account balance (% of GDP)||-1.51%||-2.12%||8.44%||5.32%||1.35%||-3.07%**||2.44%||5.15%**||-4.32%||-3.14%||-1.73%||-1.89%|
|Poverty at $2 a day (%)||20.20%||10.8%*||3.70%||0.05%*||75.6%***||68.7%**||51.20%||29.8%†||n/a||n/a||n/a||n/a|
|Infant mortality rate (under 5s, per 1,000 people)||31.6||19.4**||20.4||11.6**||80.5||62.7**||29.5||18.4**||8.3||7.5**||6.3||5.4**|
|Internet users (per 100 people)||9.2||40.7**||4.1||43.3**||1.5||7.5**||4.6||34.4**||59||74.3**||56.5||84.7**|
|Mobile cellular subscriptions (per 100 people)||19.5||104.1**||12.1||166.3**||1.2||61.4**||16||64**||49.2||89.9**||83||130.1**|
|International tourism, number of departures||2.3m||5.3m**||20.4m||39.3m**||4.9m||12.9m**||16.6m||57.4m**||58.1m||61.4m*||59.4m||55.6m|
|Stock market performance over decade*****||373.4%||240%||350%||314%||33.3%||69%|
Source: World Bank, figures at 13 September 2012. Market data source: Bloomberg, to 31 December 2011
* 2009 figure; ** 2010 figures; *** 2005 figure; † 2008 figure; †† Cumulative returns, 31 Dec 2001 to 31 Dec 2011.
J.P. Morgan Asset Management also has data from the World Bank on a variety of other economic, population, market, wealth and inequality indicators. Please contact the Press Office if you would like more data, or information on the JPMorgan Brazil, Chinese, Indian or Russian Securities investment trusts.