BRICS Are Back
Equity funds of the BRIC countries—Brazil, Russia, India and China— took in $686 million so far this year, most of it in the last 10 weeks. Asia ex-Japan equity funds saw the biggest inflow among the four major emerging-markets fund groups last week with a total of $1.9 billion. Diversified global emerging markets took in $1.18 billion and Latin America $350 million.Taiwan funds received a net $375 million, which amounts to 11% of assets, the highest since the fourth quarter of 2005.
INDIA
May 18 was a big day for India, following the end of the month-long election ushering the Congress Party into power. Unfortunately, India has complex restrictions on foreign investing. One stock worth watching is TTM, Tata Motors, which now owns Jaguar and at the same time is manufacturing the world’s cheapest auto.
Two relatively new—and very different --ETFs permit investing in the broad economy of India. The WisdomTree India Earnings Fund, EPI began trading on February 22. It is based on an earnings-weighted index of 150 companies listed on the Mumbai Stock Exchange. Each company has a minimum $200 million market cap, $5 million in earnings.
Soon to follow was the PowerShares India Portfolio, PIN. It is composed of 50 of the largest Indian stocks, weighted by “IndusCap,” a methodology that specifically addresses the foreign ownership limits. PowerShares believes it will deliver a more accurate representation of the capitalization in each company than market-cap or float-weight.
Older India ETFs include the iPath MSCI India Index, INP; Morgan Stanley India Investment Fund, Inc., IIF, and theBlackstone India Fund, IFN. All have made impressive gains recently.
BRAZIL
Brazil’s economy grew at a rate of 5.1% in 2008, down from 5.7% in 2007, according to Moody’s. Van Eck has introduced the first ETF to focus on small-cap Brazilian companies. Market Vectors Brazil Small-Cap, BRF started trading May 14.The fund holds 52 stocks that earn at least half of their revenue in Brazil and have market cap $250 million to $3.8 billion. Consumer discretionary stocks account for 32% of holdings, basic materials 16% and utilities 11%. Expenses are 0.73% of assets to cover expenses.
The only other Brazil focused ETF, iShares Brazil, EWZ, has soared 44% year-to-date yet is still 50% below its 12-month high.
Other New Emerging Markets ETFs
On May 6 WisdomTree initiated WisdomTree Dreyfus Emerging Currency Fund, CEW, which tracks a basket of 11 emerging-market currencies against the dollar. The currencies are: Mexican peso, Brazilian real, Chilean peso, South African rand, Polish zloty, Israeli shekel, Turkish new lira, Chinese yuan, South Korean won, Taiwanese dollar, and Indian rupee.
Meanwhile, Back in the USA
The top story in Barron’s last weekend: Long-term Treasury prices have plunged by about 20%, with yield increases from 2.82% at the end of 2008 to about 4.10% currently. Investors took cover with treasuries last year as the recession spread worldwide. Now, though, some believe yields on 30-year- and 10-year notes could rise to more than 5% and 4%, respectively, within the coming year.