arkay

Unfortunately, There's an "I" in BRIC (and a "C")

I would appreciate if you write with more insight on what are the reasons for these market downturn. Based on the article, it looks like you are recommending to dump Chindia stock and just concentrate on Brussia. How long can this phenomenon continue?

At present, the growth is Brussia is based on Energy and Materials (applies only to Brazil). As the oil bubble breaks, these stocks would experience tremendous pressure. In addition, these Brussia stocks are having a ball right now which is because of weak dollar. Once the dollar becomes strong these stocks would be under pressure. Along with this hyper-growth, they are also having rising inflation.

What does this mean to Chindia? They are experiencing the same cost pressure escalation that US is experiencing. The stock market is undergoing a much-needed correction. As the oil price stabilizes, there would be more stability in the stocks. If the dollar appreciates, that would benefit these economies.

The Chinese economy is totally dependent on US market. So when dollar appreciates, it affects Chinese stocks. Indian software imports and BPO service markets are experiencing tremendous pressure because of weak dollar. The long-term picture for these 2 countries are still very healthy and GDP growth is well over 8%.

Consumption within these economies are going to grow tremendous which is going to spur more growth in these markets. Bernake has already mentioned the need for a stronger dollar. Once this happens, the pendulum would be shifting towards China & India.

While infrastructure growth has been tremendous in China, India offers a huge opportunity for massive improvements in infrastructure. Once there are more infrastructure boom begins, it would generate an additional 2% of GDP which would be in addition to 7% GDP growth. So these 2 markets offer compelling value proposition

So you cannot stay away from these economies. This would be a good time to take position in these markets. As oil bubble burst, you want to transition from Brussia to Chindia until there is a correction in Brussia.