Just saying BRIC to the average emerging markets manager these days induces cringes and claims that the acronym ought to be wiped from the investment lexicon altogether. It’s a big bright world, they might tell you, and emerging markets are about so much more than just four countries, no matter what the size of their GDP is.
The offending acronym has been around since 2001 when BRIC was coined as a quick way to describe the leading emerging economic superpowers of the day: Brazil, Russia, India and China.
Since then, things have changed and emerging markets have grown. At the same time, these four countries have sorely disappointed investors recently, and many believe they don’t warrant any special attention at all. This Wall Street Journal blogger echoes what I’ve heard a few investors say—the only country worth being singled out is China, which would reduce BRIC to lowly C.
Seemingly in response to recent BRIC-bashing, stock index provider MSCI has decided to create a product that excludes these four countries. While MSCI’s main emerging market index is heavily weighted to BRIC (which make up 40%), the new MSCI EM Beyond BRIC Index will give investors exposure to 17 other countries. The returns seem to be better than the BRIC-inclusive product: the EM Beyond BRIC Index has returned 2.83% on a gross annualized basis since 2007, while the Emerging Markets Index has lost 2.1%.
The biggest countries in the new index are South Korea and Taiwan, but weightings of these are capped at 15% so that investors can also benefit from performance in other countries such as Thailand, Malaysia and Indonesia. A list of the major constituents and country exposures is below. Needless to say, more than a few exchange-traded funds are likely to mirror this index and bring the concept of a BRIC-less world to a broader set of investors.
Major constituents
Samsung Electronics (4.0% weight)
Taiwan Semiconductor (3.2%)
America Movil (2.5%)
Naspers (2.1%)
MTN Group (2.0%)
Top country weightings
South Korea – 16.16%
South Africa – 16.2%
Taiwan – 15.76%
Mexico – 12.3%
Malaysia – 8.78%