Jim O'Neill: BRIC Consumer Is Key

Includes: BRAQ, CHIQ
by: Emerging Money

Jim O’Neill, the man who invented the BRIC investment category, now says that the consumer sector in Brazil, Russia, India and China represents the “key investment of our lifetime.”

It is true that we see margins expanding and retail floor space growing throughout the emerging world. And as Walmart’s (NYSE:WMT) failure to get a piece of the Russian market — and Pepsi’s (NYSE:PEP) success in buying WBD, the country’s biggest dairy producer — show us, the legacy players throughout the space are getting their game on to get exposure to that growth.

All in all, O’Neill thinks BRIC consumer spending could grow at a rate of $500 billion (7%) a year, surpassing U.S. consumption by 2025. By that point, BRIC families will be generating at least $10 trillion a year in economic activity.

While he suspects the BRIC still represents the biggest opportunity in this space, he is also looking afield to countries like Turkey and Indonesia for even faster growth.

Within the EEM, consumer stocks have surged an average 30% year to date, so the question might be whether some of these plays are getting too rich in the short term.

Nonetheless, in the ETF space, there are CHIQ and BRAQ, focused exclusively on Chinese and Brazilian consumers, respectively. In the long term, assuming their indices are well constructed, they should bear out O’Neill’s bullish hypothesis:

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.