Reports this morning are suggesting that traders and forex brokers on top of international market news, should begin to see the emergence of a new group of so-called ‘breakout nations’. Smashing their way through the BRICs and the rapidly disintegrating mortar holding them together (the fact that they are the largest economies in their respective regions), come a new super group who have the potential to change the game.

The emergence of these new breakouts comes as the BRICs have begun to show signs of weakness amid the growing global crisis. Economists have just released forecasts for the ‘B’ of the group, Brazil, which predict a significantly lower GDP for 2012 than initially forecast. The reduction from 3.09 percent to 2.99 percent represents the third consecutive downgrade in as many weeks, according to the panel of 100 analysts and economists at top forex brokers across the globe.  

India has also suffered, with the rupee continuing on its downward trajectory on live forex charts Monday. Despite opening strongly this morning, the currency was trading at 55.35 to the dollar by 1pm, down about 15 paise from its opening. Since August 2011, the INR has tumbled by 25 percent on average, with Devendra Nevgi, Principal Partner at Delta Global Partners, identifying a multitude of global factors as the reason for the fall. "In the same period, the dollar has appreciated 15 percent vis-a-vis the euro. We presume that USD as the proxy to global risk appetite (thus to India’s external stability) and for sake of simplicity that the beta of INR to global risk appetite at 1.00”, he said. “Around 59 per cent of the INR’s move since July 2011 can be explained by corresponding appreciation in USD. The balance 41 per cent is due to domestic factors such as policy paralysis and inflation."

Leave the BRICs behind

With cracks appearing in the BRICs amid dampened demand from markets across the globe – which emerging nations should investors be turning to?

“Winning in a global economic competition is all about beating rivals in your income class, and the expectations for the class”, suggests Ruchir Sharma (pictured), head of emerging markets at Morgan Stanley Investment Management, in an article for City Am. “Because it is much easier to grow fast from a low base, it makes no sense to compare the challenges of the Czech Republic, with the average per capita income above $20, 000 to those of China, which just passed $5, 000.”

Instead, Sharma suggests, we should be treating individual nations as just that, individuals. By identifying their improvements and weaknesses on a nation-by-nation basis, a different picture will emerge.

The likes of Poland – a nation whose responsible approach to fiscal management is blazing a trail seldom seen in the rest of the euro zone – may be one such breakout candidate. According to reports released today, the zloty has advanced following its fourth consecutive weekly loss as Greek option polls reveal growing support for bailout-backing parties. Despite the fact that some top brokers are suggesting that this gain will only be temporary, the longer-term impact of an announcement from Finance Ministry which said that the equivalent of 11bn euros would be sold by the nation could have longer-term impacts, with the news sending the zloty up by as much as 1.2 percent on live forex charts.

Other ‘ones-to-watch’ identified by the emerging markets expert include “South Korea, a country that is setting a new standard for how to contribute to growth; the Philippines, a nation poised to tap into its own resource wealth”, and “Indonesia, the best-run large commodity economy”.

Stats support theory?

According a report released today which ranks trading conditions in countries the world over, the stats are beginning to back up these assumptions.

"Asia and the Pacific is host to some of the fastest growing and largest economies worldwide," the report said, while noting "a wide gap" between front runners Singapore and Hong Kong and the rest of the region. Malaysia ranked 24th, Thailand 57th, Indonesia 58th, Vietnam 68th and the Philippines 72nd in the report.

"Many agree that Asia has yet to fully leverage the opportunities offered by trade," the report said. Among the other BRIC nations, India fell to 100th, from 84th two years ago. Brazil edged up to 84th, from 87th previously. Russia improved slightly to 112th from 114th in 2010.

Sarah Cox, Staff Writer