What is the MSCI BRIC Index?
The MSCI BRIC Index measures the market performance of the emerging market indices of Brazil, Russia, India and China. The MSCI BRIC Index is one of MSCI’s regional equity indices and is a free float-adjusted market index capitalization-weighted index of four of the greatest emerging market savings..
Key points to remember
- The MSCI BRIC Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the following 4 emerging market country indices: Brazil, Russia, India and China.
- With 866 constituents, the index covers around 85% of the float-adjusted market capitalization in each country.
- The index is currently the most heavily weighted in China, accounting for more than two-thirds of its value, followed by India, Brazil and then Russia.
Understanding the MSCI BRIC Index
The term BRIC first appeared in a 2001 Goldman Sachs report titled “Building Better Global Economic BRICs”. The document correctly predicted that the weight of the BRIC economies (particularly China) in the GDP would increase significantly.
Investors can gain exposure to the BRIC markets through a growing variety of instruments, including ADR (US Certificates of Deposit), closed-end funds, AND F, and mutual funds. In 2007, for example, iShares launched the MSCI BRIC Index ETF. With 642 constituents, the index covers 85% of each country’s float-adjusted market capitalization, according to MSCI.
Prior to this index, MSCI launched the first emerging markets index in 1988. In 2021, it focused on 26 markets.
Index Makeup
“The index is revised quarterly – in February, May, August and November – with the aim of reflecting changes in the underlying equity markets in a timely manner, while limiting undue cues turnover. During the semi-annual reviews of the index in May and November, the index is rebalanced and the large, mid and small cap thresholds are recalculated,” according to MSCI.
As of December 2020, the approximate weighting of the index was as follows: China 69.3%, India 16.4%, Brazil 9.1% and Russia 5.2%.
The sector weightings were: information technology 7.6%, financials 17.4%, energy 6.7%, Consumer Discretionary 26.6%, Materials 5.9%, Basic consumption 6%, industry 4.3%, real estate 2.6%, healthcare 5.8% and utilities 2.3%.
Investing in emerging markets
However, investing in the BRICs comes with inherent risks as the markets are not fully developed. Risks such as lack of transparency, underdeveloped regulatory systems, liquidity issues and volatility may affect investment performance.
An emerging market economy is the economy of a country that is moving forward, as some liquidity local debt and stock markets, and the existence of some form of market exchange and regulatory body. Emerging markets are not as advanced as developed countries but retain more advanced economies and infrastructure than neighboring countries. Emerging markets generally do not have the level of market efficiency and strict accounting and securities regulatory standards to be on par with advanced economies (like the United States, Europe, and Japan), but emerging markets typically have physical financial infrastructure, including banks, a stock exchange, and a unified currency.