Montreal, Canada

Though still small compared to bulging deficits in the industrialized economies, some BRICs (Brazil, Russia, India and China) have started to amass current-account deficits. India and Brazil have now entered current-account deficit territory this year on the heels of rapid economic growth and rising demand for imported goods.

Though the trend among some BRICs and emerging markets is to stave off rising trade deficits, the negative balances are small and too insignificant to adversely affect the primary trend in long-term secular growth for the asset class. Both China and Russia, however, are still comfortably harboring trade surpluses.

The Reserve Bank of India recently warned that volatile capital flows “threatened to increase pressure on the country’s balance of payments,” which is now the widest current-account deficit among large emerging economies. At 2.9% of GDP, the current-account is still small compared to the overall size of the Indian economy; but it’s a reminder that even the BRICs are vulnerable to deficits – a natural consequence of strong economic growth and resultant demand.

Brazil, one of the hottest markets over the last ten years, is also now in current-account deficit territory. Brazil’s current-account widened to $43.76 billion dollars or about 2.2% of GDP as imports surge.

Despite the rising trend in BRIC trade deficits, investors have a long time before they should worry about a financial crisis developing. The BRICs and many other emerging markets still largely employ trade and budget surpluses, unlike the West whereby government balance sheets remain extremely challenged by declining tax revenues, deflation in housing and household balance sheets and the ongoing progression of debt deleveraging.

If you missed the boat on the BRICs, up 10.7% per annum since 2000, according to the MSCI BRIC Index, then wait for a correction. These markets aren’t cheap and, in some respects, are probably in a bubble. The BRICS are down 5% in 2010.