Goldman Sachs: Buy Overpriced BRIC Currencies
March 17, 2010 at 16:13 UTC || By Forex Playmaker
Bloomberg is reporting that Goldman Sachs is bullish on BRIC (Brazil, Russia, India, China) currencies despite Goldman’s proprietary models indicating that these currencies are overvalued:
The currencies of Brazil, Russia, India and China are poised to gain even as a model of long-term value suggests they’re too strong, according to Goldman Sachs Group Inc.
While Goldman’s model shows the Brazilian real, Indian rupee, Russian ruble and Chinese yuan are overvalued by about 46 percent, 16 percent, 3 percent and 0.2 percent, respectively, faster economic growth fueled by domestic demand may push them stronger, London-based Thomas Stolper wrote in an e-mailed note.
Goldman is advising clients to buy the real versus the dollar, bet on gains in Asian currencies including the rupee against Japan’s yen and purchase Russian stocks to benefit from ruble strength.
“All BRIC currencies are currently overvalued” in Goldman’s long-term valuation model, Stolper said. “And yet we expect them to get even stronger.”
Many analysts are warning of potential bubbles forming among BRIC assets and especially in the case of China. Still, with any bubble, there’s a lot of money to be made during the inflating period. The tricky part, of course, is getting out of the way before the bubble bursts.
Full Article: Goldman Sachs Says Buy ‘Overvalued’ BRIC Currencies
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