Over the past decade, the economies of Brazil, Russia, India, and China (collectively known as the BRICs) have caught investor attention thanks to their impressive growth rates and low debt levels compared to developed nations (Read: Top Three BRIC ETFs).
However, they have been uncertain picks as of late, as many companies in these nations are facing some serious troubles. That is largely due to a push away from large caps in these ‘overbought’ emerging markets, and towards smaller nations around the globe which may be the next leg of growth for the developed world.
This trend could mean that investors may want to avoid BRIC ETFs at this time, as many are expected to underperform. In fact, the International Monetary Fund cut its forecast for these nations twice last year for both 2012 and 2013.
Furthermore, on January 23, the agency once again trimmed its growth estimates for some countries. China and India experienced a cut, leaving projected rates for Brazil, Russia, China and India to be, respectively, 4.0%, 3.7%, 8.2% and 5.9% in 2013.
It also hasn’t helped that there has been optimism surrounding the slowly recovering U.S. market, so a domestic approach could be in the cards for the near future. The IMF recently upped its forecast for the U.S. The nation is now projected to grow 3% in 2013, up from previous estimate of 2.9%.
Moreover, there are other drivers that might shift investors’ focus from BRIC nations. These include the monetary stimulus package in Europe and Japan that provides a much-needed relief to their funds as well as expectations of above-market performances by some other country ETFs.
Further, there are other country ETFs like Thailand, Malaysia, Philippines, Mexico and Turkey, that offer relatively better risk-reward outlooks, at least at this time (Read: Three Overlooked Emerging Market ETFs).
With this backdrop, some of the BRIC ETFs might very well be weak picks for investors in 2013. Highlighted below are some of the funds which can be turned down in the near term by those seeking more emerging market ETF exposure (see the Zacks ETF Center).
iShares MSCI BRIC Index Fund (BKF) is a Zacks Rank #4 or Sell rated ETF which tracks the MSCI BRIC Index. It tracks the performance of roughly 313 securities with a 70% concentration on China and Brazil and close to 15% on Russia and India.
The ETF allocates around 26.2% of its total assets in the top 10 holdings. BKF charges 66 basis points as expense ratio and has an asset base of $809.6 million. It returned 13.5% in 2012.
SPDR S&P BRIC 40 ETF (BIK) is a Zacks Rank #4 or Sell rated ETF. The fund tracks the S&P BRIC 40 Index which focuses in on a subset of the constituents of the S&P/IFC Investable (S&P/IFCI) country indexes for Brazil, Russia, India and China. It has an asset base of $342.0 million and charges 50 basis points as expense ratio.