BRICs are dead, long live Emerging Markets!

INVESTORS may be forgiven for feeling cheated about the promises of Emerging Markets (EMs) as the 21st-century economic powerhouses. When Goldman Sachs famously heralded a new period of "Building the World with BRICs" back in 2003, Brazil, Russia, India and China (to whom South Africa later adhered for the capital "S" of BRICS) were supposed to be the engines of growth up to 2050, with the expected consequences on financial and industrial investment opportunities.

Candid observers pointed out then that such different nations could not possibly form a homogeneous group over the long run, but the appeal of the acronym and the exceptional China-driven and commodity-fuelled growth in most developing countries invited massive capital inflows in these countries. Alas! Today, worries abound about a Chinese economic hard landing, Brazil is getting further into recession, and sanction and oil-hit Russia struggles with massive economic contraction. The Brazilian real, the Russian rouble and the South African rand have taken a beating, and even the mighty Chinese yuan reversed its long-term appreciation trend. For all practical and analytical purposes, BRICS are dead as a concept.

PERFECT STORM FOR EMERGING MARKETS LEADS TO OVERSHOOTING ON FINANCIAL AND CURRENCY MARKETS