Elite Inside Trader

Over the past six months many of the BRIC (Brazil, Russia, India China) countries, with the exception of Russia, have seemed to have dropped the ball with performance in the markets severely lacking.  Although these countries have all had an incredible bounce back from their 2009 lows, the last few months however haven’t been as prosperous, even despite the announcement of a few major deals, mergers, and earnings numbers.

With a weak US Dollar, many of these countries are now seeing inflation being passed on in the form of higher food and energy prices.  Two things that worry politicians in these countries is that a weak dollar can lead to higher borrowing costs which will ultimately stunt growth, and higher food prices which can lead to instability.

Indian Stocks have had wild swings in the past.  The Bombay Stock Exchange has been one of our favorite markets since the March 2009 low, however it now appears that the risks may outweigh the upside potential for this market.  Valuations are getting lofty, and with companies, like Wipro, reporting disappointing outlooks, it may be time to watch this market from the sideline.  Corporate earnings of the composite stocks have leveled off over the past two years compared to the incredible growth from early 2000’s.

With inflation and interest rates rising, and the country’s exposure to food disruptions and infrastructure construction not panning out like it is in China, India seems to be a bit overvalued at the moment.

Let’s take a quick look at some of the Charts, courtesy of stockcharts.com, to see how some of the longer term charts are looking, starting with India:

BRAZIL

Brazil has been one of the most talked about countries in the investment community.  Its natural resources are abundant, economy is growing, and its trade is strong internationally.  However, the country has seen personal debt rates rise to feverish levels, inflation is a concern, bank rates are more attractive than putting money to work in the stock market.

CHINA

All in all, China has become more attractive to us from a valuation standpoint and from an earnings standpoint.  The investment China has made in infrastructure has helped to boost the domestic mobility and purchasing power.  For an ETF play, ticker: FXI

RUSSIA

Russia has been one of my least favorite places to invest, but with rich energy deposits and oil surging to new highs, investors have once again flocked into Russia.  Many analysts we follow are no longer buying here, but are holding their positions along the trend line below, or the 200 day moving average.

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Tags: Brazil, BRIC, China, India, Inflation, Russia, US Dollar