• Short term risk aversion the reason for BRIC volatility
• BRIC countries largely unaffected by US financial problems
• Broad outlook for investing in BRIC economies remains positive
The outlook for the BRIC countries remains strong for 2008, with attractive valuations and strong domestic demand driving the economies according to Michael Konstantinov, fund manager of Allianz RCM BRIC Stars Fund.
Michael Konstantinov says:
“Whilst it is clear that BRIC countries have not managed to completely escape the recent down turn in global markets, we are still seeing little impact from the turbulence in the US and primarily the financial markets there. Overall any slowdown we have seen has been marginal and I believe that domestic drivers will dominate the BRIC economic environment.
“There are few signs that the BRIC economies will suffer from the major dislocations we are seeing in financial markets in the US and to some extent in Europe. This is because emerging markets banks and financial institutions had only minor exposure to the areas where the problems are arising – namely the US sub prime sector and various mortgage-backed and asset-backed securities. As such I believe that the impact of the credit crunch taking place in the US will actually be marginal.”
Konstantinov continues:
“We are currently seeing strong growth on the loan side in the BRIC market, with on average 20 per cent loan growth across the BRIC countries. This is in the main being funded by the domestic capital market which has plenty of liquidity and therefore is less affected by the credit crunch.”
Konstantinov ends:
“However what is impacting the BRIC regions is risk aversion as a result of the credit crunch in the US. This is why we are currently seeing volatility and decline in BRIC markets. I don’t believe this will lead to any long term economic damage to growth prospects. In addition earnings within the BRIC markets are fairly robust. Indeed after the market correction valuations are looking positive, particularly in Brazil and Russia, giving us some good entry level buying opportunities. Given these strong fundamentals I believe the BRIC markets will be one of the few areas within the global context where investors will be able to find good valuations combined with an attractive growth outlook.”
• Allianz RCM BRIC Stars Fund – Investment remit
The Fund’s aim is to achieve long-term capital growth by investing predominantly in the equity markets of Brazil, Russia, India and China. Up to one third of the Fund’s assets may be invested outside the BRIC countries including developed countries and/or other emerging markets.
- ENDS -
Notes to Editors:
The markets in which the BRIC Stars Fund invests may be highly volatile and carry a higher risk both in terms of market and currency volatility, which may result in dramatic fluctuations from time-to-time. Past performance is not a reliable indicator of future performance. You should not make any assumptions on the future on the basis of performance information. The value of an investment and the income from it can fall as well as rise as a result of market and currency fluctuations and you may not get back the amount originally invested. There is no guarantee for the performance of your investment and you may get back less than you put in. The entire market of a particular asset class or geographical sector may fall, having a more pronounced effect on the Fund which is heavily invested in a small number of regions. As the Allianz RCM BRIC Stars Fund aims for relatively high performance, it can incur greater risks than those adopting a more standard investment approach.
This document has been issued in the UK by Allianz Global Investors (UK) Ltd. Allianz Global Investors (UK) Ltd is authorised and regulated by the Financial Services Authority (“FSA”). FSA Registration: 122218. The FSA’s address is 25 The North Colonnade, Canary Wharf, London, E14 5HS. Registered in England No. 1963362. Registered office: 155 Bishopsgate, London, EC2M 3AD telephone +44 (0) 20 7065 1407.
09/04/2008
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