BRIC Stocks May Double as Valuations Soar on Fed, SocGen Says

Stock markets in the biggest developing nations may double as the Federal Reserve’s monetary stimulus sends valuations back to their 2008 peak, according to Dylan Grice, a global strategist at Societe Generale SA.

Investors have poured record amounts of money into emerging-market equity funds this year as U.S. benchmark interest rates near zero spurred demand for higher-yielding assets abroad, EPFR Global data show. Fed Chairman Ben S. Bernanke said last week more monetary stimulus may be warranted after $1.7 trillion of debt purchases failed to spur growth.

Low interest rates under Bernanke’s predecessor Alan Greenspan helped fuel the U.S. housing boom and bust that precipitated the global financial recession two years ago, economists including John Taylor of Stanford University have said. The MSCI BRIC Index of shares in Brazil, Russia, India and China has surged 164 percent from its 2008 low, beating the 40 percent gain in the Standard & Poor’s 500 Index.

“If central banks know anything, it’s how to blow bubbles,” Grice, who is based in London and was ranked the No. 2 strategist behind SocGen’s Albert Edwards in Thomson Extel’s Pan-Europe 2010 survey, wrote in a research report e-mailed today. “Emerging-market valuations could go much further before they could be considered seriously stretched.” (more)