ETFs That Should Benefit as BRICs Get Stronger

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 |  Includes: BIK, BKF, BRF, EEB, EPI, EWZ, FXI, GDX, GDXJ, GLD, GXC, HAO, INP, PGJ, PIN, RBL, RSX
by: Tom Lydon

Last year, leaders from Brazil, Russia, India and China (BRIC) floated the idea of conducting trade without relying on the U.S. dollar as a reserve currency. At the group’s second summit in Brazil last month, BRIC countries voiced the need for big changes that could add to the strength of their economies and related ETFs.

For now, the United States still reigns supreme, with the largest economy of any other single country and a strengthening dollar in the face of an unraveling euro, writes Ivan Martchev for Yahoo! Finance. The BRIC economies combined are larger than that of the States’ on a PPP basis, but using current exchange rates instead of PPP, the four nations are actually smaller because they don’t have free-floating currencies.

In both last year’s and this year’s BRIC summit, finance and banking officials discussed the idea of trade agreements permitting trade in local currencies. The People’s Bank of China has already started to set up bilateral currency swap lines to facilitate yuan-based trade. However, the yuan is still pegged to the U.S. dollar.

So far, the dollar reserve currency standard has been maintained because of the U.S. has the deepest and most liquid capital markets in the world and payments in dollars can come in a variety of dollar-denominated assets.

Martchev believes the following will perform as BRIC currencies strengthen:

  • SPDR Gold Shares (NYSEARCA:GLD). Western currency holders will likely look to gold – the rising European interest at present is a good indicator.
  • The Market Vectors Gold Miners (NYSEARCA:GDX) and Market Vectors Junior Gold Miners (NYSEARCA:GDXJ) may also do well as gold prices rise.

Single-country ways to get your BRIC fix include:

  • iShares MSCI Brazil (NYSEARCA:EWZ)
  • Market Vectors Brazil Small-Cap (NYSEARCA:BRF)
  • Market Vectors Russia ETF (NYSEARCA:RSX)
  • SPDR S&P Russia (NYSEARCA:RBL)
  • PowerShares India (NYSEARCA:PIN)
  • WisdomTree India Earnings (NYSEARCA:EPI)
  • iPath MSCI India ETN (NYSEARCA:INP)
  • iShares FTSE/Xinhua China 25 (NYSEARCA:FXI)
  • PowerShares Golden Dragon Halter USX China (NYSEARCA:PGJ)
  • SPDR S&P China (NYSEARCA:GXC)
  • Claymore/AlphaShares China Small Cap (NYSEARCA:HAO)

BRIC plays include:

  • SPDR S&P BRIC 40 ETF (NYSEARCA:BIK)
  • iShares MSCI BRIC Index (NYSEARCA:BKF)
  • Claymore/BNY Mellon BRIC (NYSEARCA:EEB)

Max Chen contributed to this article.

Disclosure: None