BRIC Manufacturing Index

Goldman Sachs’ chief economist Jim O’Neill coined the term “BRIC” to refer the emerging economies of Brazil, Russia, India, and China on the basis of their economic potential to grow. Manufacturing activity forms an integral part of these countries’ economic growth. China’s PMI (purchasing managers’ index) contracted more at 47.2 in September. It was the fastest deterioration since 2009. Brazil and Russia continued to stay below the neutral level at 47 and 49.1, respectively, in September. Although India’s PMI level stood at 51.2 in September, it fell by 1.1 index points compared to its reading of 52.3 in August 2015.

China’s slowdown is apparent with the weakness in new orders, falling production, and softer global demand. Even India’s PMI was at a slower pace in September due to falling orders and a slower rise in the output. However, the outlook on Russia and Brazil still appears to be dampened. The manufacturing index rose in September. Inflationary pressures in Brazil seem to be moderating. Also, falling crude and industrial commodity prices have kept input costs at lower levels in China and India.

BRIC ETF price performance 

Over the past year, the iShares MSCI Emerging Markets (EEM) fell 19.50% as of October 1. Brazil and Russia are struggling with high inflationary pressure. Due to the weakening economic conditions, the iShares MSCI Brazil Capped (EWZ) and the Market Vectors Russia ETF (RSX) were the worst hit ETFs in the BRIC nations with a fall of 48.10% and 30.20%, respectively, over the same period. 

Although the Chinese economy is contracting, the iShares China Large-Cap (FXI) outperformed its counterpart the WisdomTree India Earnings ETF (EPI). While FXI fell 4.70% over the past year as of October 1, EPI fell by 9.20% over the same period. 

Samsung Electronics (SSNLF), Petrobras (PBR), Vale (VALE), and Vedanta (VEDL) fell 18.80%, 68.90%, 61.60%, and 71.20%, respectively, over the past year as of October 1. 

With China slowing down and Russia and Brazil’s high inflationary environment, major world economies are looking at India to contribute largely towards the global recovery. 

India’s demographic is dividend. It has a growth rate of 7%. As a result, it’s set to take the charge and change the events.