Seeing the upward trend in the national economy, investors are favoring U.S. stocks over stocks from the companies in BRIC (Brazil, Russia, India and China). Data show that fund flows and volatility measures in all certainly indicate that institutions are increasingly seeking the relative safety of American equities as almost $95 billion was poured into exchange-traded funds of American shares this year.
The U.S. market is calmest when compared with China, Brazil, India and Russia over the last six years. Developing-nation exchange-traded funds saw withdrawals of $8.4 billion. Similarly, the Standard & Poor’s 500 Index (SPX) traded at 16 times profit and went higher by 70 when compared with the MSCI Emerging Markets Index.
Exchange-Traded Funds or ETFs Increasing for the U.S.
There has been an upward movement of ETFs in the U.S. market as investors are sending cash to the nation’s equity ETFs every month for the last eight months now. It reached to $32 billion in July which is the highest since September 2008. On the contrary, the developing nations, particularly, BRIC nations have seen a downfall in ETFs as investors are taking their money away from these markets.
Cash inflow to the U.S. market is a better indication when the Federal Bank is mulling a plan to remove stimulus. Observers claim that cash is draining from BRIC market and flowing into U.S. stock funds at the fastest rate which is indicative of the slowing economies of the BRIC nations. Where China’s export has decreased, Indian national currency is at all time low point.
Why Investors Running Away from BRIC Market?
Observers also believe that the weakness in emerging markets and the associated economic troubles are some major factors that contribute to cash flight from the BRIC market. Now, investors are relocating their funds to the U.S. market as they see potential in it in the light of the latest positive indicators. The U.S. is being seen as a stable economy by a lot of investors.
Inward cash flow in the U.S. is also due to revenue exposure the companies have received recently. The companies that have their markets in BRIC countries have not been able to meet investors’ expectations and even trailed the S&P 500. China and India are facing major troubles. Whereas China’s growth has slowed after decades’ of super-growth, India has a mammoth current-account deficit to cover.
To contact the reporter of this story: Jonathan Millet at email@example.com