Emerging markets are decoupling from Russia as investors withdraw funds because of sanctions over Ukraine, putting money into stocks from Brazil to India and China.
“This is shaping up to be a year of BRICs absent the R,” Masha Gordon, who oversees more than $2.5 billion in assets as head of emerging-market equities at Pacific Investment Management Co. in London, said in a July 29 interview.
The CHART OF THE DAY shows Russia’s benchmark Micex Index diverging from the MSCI Emerging Markets Index following the imposition of sanctions on Russia and the downing of Malaysia Airlines jet MH17 over Ukraine on July 17. Brazil, India and China account for 33 percent of the developing-nation gauge, according to data compiled by Bloomberg.
The MSCI index climbed to the highest close in more than 18 months on July 24 and emerging-market funds recorded their biggest weekly inflows since January 2013 on July 30 on optimism for the outlook of developing economies. Stocks slid last week amid Argentina’s default and disappointing earnings.
MSCI Inc. introduced indexes last week that exclude Russia for clients seeking to avoid investing in a country accused by the U.S. and European Union of arming and training separatist rebels in Ukraine.
The 8.6 percent decline in the Micex this year contrasts with increases of 20 percent for India’s S&P BSE Sensex, 8.5 percent for Brazil’s Ibovespa and 3.3 percent for the Shanghai Composite Index.