BRIC troubles scare markets

City A.M. Reporter
INVESTORS have been pulling hundreds of millions of dollars out of stock funds that invest mainly in companies associated with the big four emerging market nations of Brazil, Russia, India and China.

But it’s China that is causing most of the worry for investors, amid signs that the world’s second-largest economy is slowing more sharply than expected.

Even emerging market bull Jim O’Neill, chairman of Goldman Sachs Asset Management, who coined the BRIC acronym, said he’s been a bit surprised by the slowdown in China. But O’Neill remains convinced China’s economy will be more than enough to make-up for any weakness in the other BRIC nations.

“It is making the trajectory that I predicted difficult to stick with,” O’Neill said about the slowdown. But he added, “I find it hilarious that people question the thesis on the basis of two quarters.”

The second-quarter was not kind to so-called BRIC-focused stock funds, with investors redeeming $787m (£508m) during the period, according to fund tracking firm EPFR. Chinese-focused funds were hit particularly hard, with investor redemptions totalling 88 per cent of the $1.6bn in new money those funds took in during the first quarter.