Germany-based Allianz Global Investors remains bullish about the economic prospects for the the BRIC economies despite the chill winds blowing through the global financial markets.

“Emerging markets are trading at extremely low valuations and are already discounting a very bleak outlook. Taking a global perspective, Brazil, India and China stand out as markets which we expect to grow during 2009,” Michael Konstantinov, who manages the Allianz RCM BRIC Stars Fund, said in a note.

“ Brazil is expected to grow somewhere in the range of 1.5 to 2 per cent, India in the range of 5.5 to 6.5 per cent, and China 8 per cent. While the growth rates may not be as exciting as they have been, on a relative basis the BRIC countries are less affected by the global economic slowdown,” Mr Konstantinov said.

The BRIC nations have accumulated large reserves that can now be used to stimulate domestic economies. Apart from China, where exports account for about a third of gross domestic product, these economies are less export dependent and domestic demand dominates GDP growth.

As far as China is concerned, the investment firm believes that the “very aggressive” stimulus policies of the Chinese government for 2009-2010, equivalent to 6.5 per cent of GDP a year, will work.

“While growth slowed significantly in the fourth quarter of 2008, we believe that the quick response by the Chinese authorities will stabilise growth and actually lead to a growth rate of somewhere around 8 per cent in the second half of this year,” he said.

As a result of its confident stance, the fund is overweight of Chinese assets in its portfolio.

On India, Mr Konstantinov is cautious; national elections in May are creating uncertainty about the stock market, while the country has a large current account deficit and is therefore dependent on foreign capital inflows, which have slowed in recent months. The fund is retaining an underweight stance on India before the national elections.

In the case of Russia, the fund manager said that Russian equities are trading on valuation levels not seen since the country’s stunning debt default of 1998. “However, despite all the difficulties on the macro side, Russia is in better shape now than in 1998. Russia pretty much boils down to a call on oil prices. If we believe that oil prices are going to start to recover then we will go back heavily into the Russian market,” he said.

The fund has started to gradually moderate its bearish stance on Russia.

Finally, as far as Brazil is concerned, Allianz sees the country continuing to benefit from its strong and competitive agricultural sector, even though the fall in commodity prices recently has taken some of the shine off this part of the country’s economy.

Consequently, Mr Konstantinov has a neutral to overweight position on Brazil.