Geopolitics on Finance: Impact of BRICS on Financial Markets

The United States has dominated the global scene politically and economically since the end of the Second World War. However, it has had strong rivals, namely the Soviet Union, Russia, and China. However, the economic and political worlds still revolve around the United States. Yet, emerging countries are gaining more and more influence economically, namely Brazil, Russia, India, China, and South Africa, forming BRICS. In today’s founders' thoughts, we will explore the impact of BRICS on financial markets.

Economic Influence of BRICS

The BRICS countries represent a significant portion of the world’s population and landmass, consisting of the top 2 most populated nations and 2 of the 4 largest nations by landmass. These countries each have diverse economies, from energy to manufacturing to IT. Thus, BRICS nations contribute significantly to the world economy, accounting for over 20% of global trade. Their internal activities and decisions can sway trade flows and the commodity markets. Furthermore, many BRICS nations are crucial to international supply chains. For example, to get a final product, the raw materials are often harvested from South Africa, Russia, and Brazil, while the manufacturing is executed with China. This supply chain is pivotal for many multinational corporations that consist of the S&P 500, displaying the economic influence of BRICS.

Market Dynamics and Trends

BRICS has a unique dynamic in the international market because of its role in the commodity markets. For example, Brazil, Russia, and India are unique exporters who influence oil, metals, and agriculture, while China controls most of the world’s manufacturing. Since BRICS has such control over the valuable commodities of the world, it has a unique dynamic and position of power and control. BRICS’s unique position opens it up to significant international investment, primarily because of its emerging market opportunities and growth potential. Finally, as financial markets in these nations become more integrated globally, such as China and India’s stock exchanges, which have grown in influence, it will be interesting to observe how they adapt regulations and policies to appeal further to international investors.

Investment Opportunities and Risks

Most opportunities investment-wise will occur in the specific sectors where BRICS nations exhibit much of their power, such as energy, manufacturing, and IT. As their economies grow, the strength of their primary industry will grow as well. However, with great potential for return comes an equal risk. Because BRICS nations are emerging markets, they often experience political instability and unpredictable changes. For example, geopolitical shifts caused by Russia have led many international investors to incur losses. Finally, to remain profitable when investing in BRICS nations, it is crucial to practice diversification while maintaining a long-term outlook and closely monitoring internal developments to prepare for unpredictable changes.