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Solid financial strength

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Supportive anti-crisis measures

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Robust domestic consumption

Compared with the western countries, debt levels in the BRIC markets are generally lower with huge foreign reserves and abundant liquidity.

The pace of economic growth of the BRIC markets is not hindered by the painful process of de-leveraging that plagues many of the industrialised countries. In fact, the BRIC markets had more than US$2.8 trillion of aggregate foreign reserves in 2008. In 2006, China surpassed Japan and became the country with the most foreign reserves around the world. Even Brazil, a country that used to be plagued by heavy debt, has turned into a creditor from a debtor in 2005.

With solid financial strength, the governments of BRIC are able to mitigate the impacts of the global slowdown and also provide sufficient ammunitions to implement easing monetary and fiscal policies, such as cutting interest rates and taxes, increasing subsidies, developing infrastructure and banks are encouraged to provide loans, with the aim to maintain the growth momentum of their economies.

China: A RMB4 trillion stimulus package that focuses on infrastructure and domestic consumption, offsetting the adverse impacts of the shrinking external demand.

Brazil: The standard of living in Brazil has improved and foreign investments have increased markedly as the government has been implementing a series of reforms since 2003, which successfully make the inflation in check with a stable currency policy. As a result, Brazil is now attracting the highest level of foreign direct investment in the developing world.

India: Government has indicated that it will further increase expenditures in infrastructure, accounting for 9% of the gross domestic product. In other words, India will spend about USD1.5 trillion in developing infrastructure until 2017.

Russia: The Russian Central Bank has lowered its refinancing rate several times since April, from 13% to the current 9.5%. Also, the Russian government has paid special attention to its citizen’s livelihoods while dealing with the crisis, including raising pensions.

With the rapid pace of urbanisation, a soaring middle class with high purchasing power has become the main driver of domestic demand. According to Goldman Sachs, the number of middle class in the BRIC markets reached 1.5 billion in March 2009—more than double of the G6, which has a population of less than 7 billion. In fact, figures from Goldman Sachs and Haver show that as of March 2009, retail sales of the BRIC markets have surpassed the US. It is estimated that over 70% of the global market growth will be attributed to the BRIC markets.

The governments of BRIC tend to implement market-friendly policies with the aim to boost economic growth. With a more stable political backdrop, foreign investors are flocking into the BRIC markets in recent years. The BRIC stock markets continue to outperform the global emerging markets and the global markets over the past ten years, with accumulative returns near 490%¹. In fact, the BRIC markets have excellent long-term growth potential as these countries are at a relatively early stage in their development.