Salient to Investors:

Investors are exiting the BRICs as disappointing profits and growing state intervention cause stocks to trail global shares for a fourth year. Over 59 percent of MSCI BRIC index companies have missed analyst estimates for the fourth-straight quarter in 2013. Peter Dixon at Commerzbank says lower valuations means the time is ripe for a rebound.

Trading by Brazilian individual investors is the lowest since 1999, Russian mutual funds posted 16 straight months of outflows, the most since at least 1996, withdrawals in India are the biggest in over 2 years, and investors emptied more than 2 million stock accounts in the past 12 months in China.

Michael Shaoul at Marketfield Asset Mgmt sees a steady exit, and is bearish on Brazil, India and China stocks, adding that locals have yet to reach the capitulation seen at market bottoms. Declining participation by local investors in Brazil preceded equity losses in 2010 and 1999.

John-Paul Smith at Deutsche Bank said locals know the fundamentals of a large part of their investable universe are not good, and it is difficult to find stocks with improving fundamentals at attractive valuations.

MSCI BRIC shares trade at 9.2 times 12-month earnings estimates, the cheapest level versus global equities since at least July 2009, and versus 13 times for the All-Country index.

Plamen Monovski at Renaissance Asset Managers said domestic money flows, outside of periods when there’s distress or forced selling, are less important than fundamentals for long-term equity returns: the 4-yr rally in US stocks suggests markets can advance even as some investors exit.

ICI reports US investors have added $20 billion to mutual funds in 2013.

Dmitry Sukhov said state interference in listed companies is driving away local investors and prefers developed-market companies that trade in Hong Kong, London and New York. Sukhov said the Russian economy is becoming less market-friendly and investors are disappointed they got the opposite of the liberalization of different economic sectors that they were expecting.

In the 3 years ended 2012, per-capita GDP in China jumped 63 percent to a record $6,094 , the BRIC average rose to an all-time high of $8,447.

Over 60 percent of Shanghai index companies so far reporting have missed analysts’ estimates versus 42 percent in the MSCI All-Country index.

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