The prospect of a stable government in
The BRICs —
As for India, look no further than Morgan Stanley’s decision last week to move overweight for the first time following the clear cut political victory of the ruling Congress Party.
“Our economics team expects the decisive election victory by the Congress Party to lead to progress in areas including public finances, acceleration in infrastructure spending, augmentation of government resources through privatization and implementation of de-regulation for the pension funds, banking and retail sectors,” it said in a client note.
That the Congress victory was a pleasant surprise for investors can be seen from the 17% rise on Monday of the BSE Sensex stock index and the 3% gain in the rupee, the largest one-day rise in more than a decade.
“It has been one of the most peaceful and arguably successful (Indian elections) of recent times. That should be good for investors’ confidence,” said John Cleary, chief investment officer of Focus Capital.
The BRIC grouping was, of course, originally an investment marketing concept.
The four countries share a number of factors, including huge populations, relatively untapped potential and the likelihood that they will compete on global terms with the Group of Seven industrial nations within a few years.
But because they arguably have as many differences than similarities, investors over time have tended to allocate between them rather than treating all four as equal.
During the boom years, for example, it was not unusual to find investors favoring, say, commodities-producing
In dollar terms as measured by MSCI, however,
What brakes there have been on
Those questions have now been answered.
“Foreign investors were worried,” said Bob Parker, vice chairman at Credit Suisse’s asset management arm. The election “has removed uncertainty.”
None of this is to say, however, that the BRICs have a free run ahead of them.
But the biggest short-term issue facing the BRICs may simply be that they have rebounded so far so quickly.
“The markets have moved a very long way,” said Andrew Milligan, head of global strategy at Standard Life Investments. “There is a large amount of good news in the price.”
Credit Suisse, meanwhile, pared back some of its exposure to
Parker said he expected the BRIC stock markets to give back some of their gains in the short term because they have risen so much this year. But the longer term outlook is good.
“The downside is limited and by September and October the markets will have recovered to higher levels than what we have now,” he said.
India is now part of that mix.