Investment Implications of the Rise of Brics+

Investing over the past three decades has relied on assumptions about three key dynamics that have underpinned the global order in the post-Cold War era: unfettered free trade, globalisation and world peace being assured under the Western-led international system. These dynamics have been synonymous with the free movement of goods, capital, people and information, and …

Investing over the past three decades has relied on assumptions about three key dynamics that have underpinned the global order in the post-Cold War era: unfettered free trade, globalisation and world peace being assured under the Western-led international system.

These dynamics have been synonymous with the free movement of goods, capital, people and information, and the absence of systemic conflict between rival powers.

Now, however, all three premises can no longer be taken for granted and are in fact being challenged at a time of profound change in the global geopolitical and economic order.

US President Donald Trump’s sweeping tariffs and China’s stinging retaliatory measures are symptomatic of a new contest for global leadership that is reshuffling the geopolitical and economic world order. This tectonic transition is upending all these three dynamics, and a major rethink of the way we approach investing is due.

Rise of Brics+ and tectonic transition in the geopolitical and economic order.

ALSO READ: BRICS bank eyes Morocco for membership, seeks to expand global reach

Originally a loose alliance of Brazil, Russia, India, China and then South Africa, Brics+ now extends to an array of partner countries representing almost half the world’s population. In an increasingly polarised world, Brics+ is developing as a counterweight to the G7 by giving agency and influence to countries in the Global South that are dissatisfied with the existing international system. Moreover, the coalition is gaining momentum as an entity by organising its collective resources and markets to challenge and disrupt the Western-led international system.

This maturing alliance serves as a mechanism for China to reach important markets that are not politically aligned with the US and its coalition. Beijing’s relationships help it secure access to crucial resources and to extend its influence – all while hedging against restrictions on

Brics+ presents a formidable challenge to the West in many crucial areas: technology, energy resources, a broad range of critically important commodities, control of major maritime and trade choke points, expanded military capabilities, and favourable demographics.

These compelling assets explain, in part, the Trump administration’s focus on changing the established practices of the global economy. Under Trump, the US is seeking to slow the ascent of Brics+ and China before they become the dominant alliance in a new geopolitical era. The unipolar, post-Cold War period – centred on the US has ended. What comes next isn’t certain, but for now it resembles at least a bipolar competition between the US and China, each with its respective coalitions.

Investment opportunities The rise of the Brics+ is grounds to pause and reflect on the asset management practice, particularly as our analysis suggests this evolving coalition of nations and the increasingly fractured world order will have profound effects on the way we approach investing, and the way we categorise asset classes.

We are accustomed to dividing assets into those from developed and emerging markets. Developed markets are widely seen as enjoying high liquidity, low political risk, high gross domestic product per capita, advanced technologies and exports from a variety of sectors. Emerging markets are usually seen as offering high potential growth but lower liquidity and a narrower scope of investment opportunities, while carrying greater political risk and potential volatility.