What Is the MSCI BRIC Index?
The MSCI BRIC index measures the equity 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 capitalization weighted index of four of the biggest emerging market economies. .
- The MSCI BRIC Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance across the following 4 Emerging Markets country indexes: Brazil, Russia, India and China.
- With 866 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.
- The Index is currently most heavily weighted to China, comprising 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 called "Building Better Global Economic BRICs." The paper correctly forecasted that the weight of the BRIC economies (particularly China) in global GDP would grow significantly.
Investors can gain exposure to BRIC markets through an increasing variety of instruments, including ADRs (American Depositary Receipts), closed-end funds, ETFs, and mutual funds. In 2007, for example, iShares launched the MSCI BRIC Index ETF. With 642 constituents, the index covers 85% of the free float-adjusted market capitalization in each country, according to MSCI.
Before this index, MSCI launched the first Emerging Markets Index in 1988. As of 2021, it was focusing on 26 markets.
"The index is reviewed quarterly—in February, May, August and November—with the objective of reflecting the change in the underlying equity markets in a timely manner, while limiting undue index turnover. During the May and November semi-annual index reviews, the index is rebalanced and the large, mid and small capitalization cutoff points are recalculated," according to MSCI.
As of December 2020, the approximate weighting of the index was: China 69.3%, India 16.4%, Brazil 9.1%, and Russia 5.2%.
Sector weights were: Information Technology 7.6%, Financials 17.4%, Energy 6.7%, Consumer Discretionary 26.6%, Materials 5.9%, Consumer Staples 6%, Industrials 4.3%, Real Estate 2.6%, Health Care 5.8% and Utilities 2.3%.
Investing in Emerging Markets
Investing in BRICs, however, carries inherent risks because the markets are not fully developed. Risks such as lack of transparency, undeveloped regulatory systems, liquidity issues, and volatility can affect the performance of investments.
An emerging market economy is a nation's economy that is progressing toward becoming advanced, as shown by some liquidity in local debt and equity markets, and the existence of some form of market exchange and regulatory body. Emerging markets are not as advanced as developed countries but maintain economies and infrastructures that are more advanced than frontier market countries. Emerging markets generally do not have the level of market efficiency and strict standards in accounting and securities regulation to be on par with advanced economies (such as the United States, Europe, and Japan), but emerging markets do typically have a physical, financial infrastructure, including banks, a stock exchange, and a unified currency.