14
Oct
n an attempt to understand emerging markets, many analysts and investors have sought to club countries together.
Shared characteristics, rather than shared geographies, have been used to match up different economies, with varying degrees of success.
It’s a phenomenon for which Jim O’Neill, then head of global economic research at Goldman Sachs, can take equal parts credit and blame.
Mr O’Neill grouped together Brazil, Russia, India, and China. Since then, the practice has taken off. Analysts keen to demonstrate the similarities between many modern economies have thrown around many different acronyms and monikers.
The original acronym became an association, and in 2011, the club expanded. It now includes South Africa, and the acronym was extended with an additional capital letter, to become BRICS.
Putting these all together leaves a picture that is somewhat of a mess. But the practice is not “as moronic as it seems”, said Paul McNamara, an investment director at GAM. There are certain things about globalisation that warrant categorisation, and while “you lose nuance, you get the point across” by creating these groups.
It’s certainly true that the Fragile Five did group those nations most vulnerable to adjustments in Federal Reserve policy, for example. But often, the categories can end up obscuring important differences.
Gemma Godfrey, head of investment strategy at Brooks Macdonald Asset Management, said that “these acronyms are for ease of reference only, but in terms of understanding, they can do more harm than good”.
“They are too blunt a tool and can sometimes group countries by the most superficial of reasons, glossing over deeper differences that are much bigger drivers of their future outlook,” she added.
In the case of the BRICS, Jeremy Lawson, chief economist at Standard Life Investments, pointed out that Russia and India have almost nothing in common. India is much poorer in per capita terms, while having a much more advanced democracy.
Yet there remains a “desire to have these taxonomies, to help simplify the world”, Mr Lawson said. Yet when we’re too eager to classify, we can miss out on the subtleties that make investing difficult.
BRICs
Which countries: Brazil, Russia, India, China
Who invented it: Jim O’Neill, Goldman Sachs
What does it tell us: These were supposed to be the big emerging economies at the turn of the century.
BRICS
Which countries: Brazil, Russia, India, China, South Africa
Who invented it: Unlike other acronyms, the BRICS is an actual club of countries.
What does it tell us: Not much, apparently. “For South Africa to be treated as part of Bric doesn’t make any sense to me,” said Jim O’Neill in December 2010.
MIST
Which countries: Mexico, Indonesia, South Korea, Turkey
Who invented it: Jim O’Neill, Goldman Sachs
What does it tell us: These are the next tier of large emerging economies, to follow the BRICs.
MINT
Which countries: Mexico, Indonesia, Nigeria, Turkey
Who invented it: Jim O’Neill, Goldman Sachs
What does it tell us: This was the next iteration of the MIST acronym, changed after BBC staff convinced Mr O’Neill that Nigeria was a more fitting member.
Next 11
Which countries: Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey, South Korea, Vietnam
Who invented it: Jim O’Neill, Goldman Sachs
What does it tell us: Identified as all having the potential to become among the world’s largest economies this century.
Fragile Five/BIITS
Which countries: Brazil, Indonesia, India, Turkey, South Africa
Who invented it: James Lord, Morgan Stanley
What does it tell us: Captured the global economies most vulnerable as the Federal Reserve began to tighten monetary policy. All five members run large current account deficits.
EAGLEs
Which countries: Brazil, China, Egypt, India, Indonesia, South Korea, Mexico, Russia, Taiwan, and Turkey
Who invented it: BBVA
What does it tell us: Stands for “Emerging And Growth Leading Economies”. The members of this group are updated frequently.
PIIGS
Which countries: Portugal, Italy, Ireland, Greece, Spain
Who invented it: Unknown. Barclays Capital analysts were banned from using the term in 2010.
What does it tell us: Does not refer to emerging market economies, but to what were the eurozone’s weakest and most debt-laden economies at the height of the currency bloc’s crisis.
CIVETS
Which countries: Colombia, Indonesia, Vietnam, Egypt, Turkey, South Africa
Who invented it: Michael Geoghegan, HSBC
What does it tell us: This category was supposed to include the countries that would drive growth from 2010 to 2020.
SANE
Which countries: South Africa, Algeria, Nigeria, Egypt
Who invented it: Unknown
What does it tell us: What were considered the African continent’s most likely growth powerhouses.
TIMPs
Which countries: Turkey, Indonesia, Mexico, Phillippines
Who invented it: Turner Investments
What does it tell us: Another contender to be the next BRICs.
STUCK
Which countries: South Africa, Turkey, Ukraine, Colombia, UK
Who invented it: Prime Economics
What does it tell us: These countries had the world’s five largest current account deficits in 2013, making them vulnerable to external shocks.
Source: http://www.telegraph.co.uk/finance/economics/11158386/Beyond-the-BRICs-the-guide-to-every-emerging-market-acronym.html