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Emerging Markets: Goodbye BRICS, Hello MIST

The investing acronym BRICS (as in Brazil, Russia, India, China and, more recently, South Africa) was conjured up by Goldman Sachs (GS) economist Jim O’Neill back in 2001. It has since become synonymous with vibrant growth, of the sort the mature, developed economies supposedly can no longer achieve. Yet does the BRICS moniker really still resonate with investors?

There’s no denying that these big emerging economies continue to play a meaningful role in the world economy.  “The BRICS alone have been responsible for 55% of global growth since the end of 2009,” the Economist points out. “Dragged down by debt and austerity, the 23 countries that make up the developed world contributed just 20% to that growth.”

 

However, stock prices in Brazil, Russia, India, and China as of mid-March have lagged behind U.S. indices for a fourth straight year, due to disappointing economic growth and corporate earnings. While the Dow Jones Industrial Average and the S&P 500 Index are trading at an all-time high, the iShares MSCI BRIC Index (BKF) is down more than 30% since the start of 2008.

BKF Total Return Price Chart

BKF Total Return Price data by YCharts

Investors in the BRICS countries are also losing their appetite for equities, according to Bloomberg Businessweek. Trading by Brazilian individual investors has dropped to the lowest level since 1999, as the benchmark Bovespa index has fallen 7 percent this year. Russian mutual funds posted 16 straight months of outflows, according to the publication.

Small wonder then that the Wall Street money shops, including Goldman, have started touting a new emerging market acronym: MIST, as in Mexico, Indonesia, South Korea, and Turkey. These nations make up a big chunk of Goldman’s N-11 equity fund launched in early 2011.

In terms of GDP and fund holdings, the MIST nations are the biggest markets in Goldman Sachs’s N-11 Equity Fund (GSYAX) launched in February 2011. The fund had $113 million in assets (as of June 30) spread out across 73 stocks. It’s up about 16% over the past year.

The takeway: bye, bye BRICS and hello MIST?

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