BRICS may turn into TIKS: interests of IT investors have shifted to Asia

Published on March 16, 2016

BRICS may turn into TIKS: interests of IT investors have shifted to Asia

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    The IT industry of the BRICS countries is losing investment attractiveness. But now IT companies from the so-called TIKS countries come to the fore.

    The union of Brazil, Russia, India, China and South Africa was “buried” after Goldman Sachs closed a fund that invested in BRICS countries. The asset level of this fund fell to $ 100 million (a peak of 800 million was reached 6 years ago).

    According to some experts, the BRICS should be reborn: instead of Brazil, the Russian Federation and South Africa, Taiwan and South Korea will enter it. Thus, the association is updated to TIKS. According to a study by the American research company Copley Fund , the share of TIKS countries in the portfolio of medium-sized investment funds in emerging markets reached 54%.

    Now in Taiwan, the IT sector occupies 35.9% of the total capitalization of local companies, in India - 14.1%, in Korea - 9%. The share of IT in the capitalization of Chinese companies is only 4.8%, but the shares of companies from mainland China are not yet included in the MSCI index for emerging markets (EM), so the real situation in China is reflected in the Hong Kong indicator of 11.6%, the data cite “ Vedomosti. "

    In Russia, high-tech companies provide only 4.1% of the market capitalization. True, in the EU countries, as well as in Australia and Canada, the share of IT is lower, and in Brazil it is about 0.3%.

    BRICS countries are interested in IT-products from Russia, the head of the Ministry of Communications and Mass Media Nikolay Nikiforov noted in January:
    “This is quite possible to do, there are already specific companies, products, projects, and we intend to support them. I am also in close contact with colleagues in the BRICS bloc, we regularly meet, communicate, synchronize our action plans, and may even come to a specific program of such actions. We agreed that the meetings will be held annually. The BRICS Chairmanship in February 2016 will pass to India, we will prepare a meeting already on Indian territory. ”

    “In terms of GDP growth, TIKS, of course, is faster than BRICS. But mainly due to China (+ 6.9%), India (+ 7.3%), Korea (+ 3.0%). Things are bad in Taiwan’s economy, ”said Mikhail Krylov , director of the analytical department of the Golden Hills - Capital AM investment company .

    David Lubin, who heads the emerging markets economics department at Citi , explains this by the limited freedom of expression in Russia: “People in Russia do not see the point in doing something. I believe that an explanation must be sought in the political system and political culture. To open the way for innovation, freedom must be given to dissent, disagreement, and creative expression. ”

    However, China cannot boast of having special freedom of thought and expression. In addition, as noted by Charles Robertson, who works at Renaissance Capital Bank , the achievements in IT in Russia are more significant than many might think.

    Robertson refers not only to the experience of Yandex and Mail.ru , but also to the Magnit retail chain : “Trade is based on logistics, and Magnet uses its own developments in this area, no worse than Amazon .”

    Konstantin Styrin, professor of the Russian Economic School, believes that the main obstacle for Russia is the low quality of institutions that ensure the rule of law, protection of private property and an independent court. This is especially harmful to the IT sector, where the risks are relatively high. Styrin also notes the excessive "overregulation" of the economy.

    The time of Russia's chairmanship in the BRICS has come to an end. It lasted from April 2015 to February 2016. The prospects for the continued existence of the organization are now in question.

    Nevertheless, not all BRICS countries are evaluated in a negative way, but only the states that are experiencing an economic downturn - Brazil, Russia and South Africa.

    Professor from MITEduard Kroli is optimistic about Russia: “Scientific education here remains high-quality, and, in particular, a high level in applied mathematics over time can allow Russia to achieve a lot in the development of IT networks, information security and data analysis.”

    No one has officially announced the dissolution of the BRICS. Rising commodity prices or diversification in the member countries of the union may again make them attractive to investors.