There's an ETF for that? Investing in BRICS Countries

iShares MSCI BIC ETF

BKF

+0.76%

BKF offers investors core exposure to three of the largest and most investable BRICS nations—Brazil, India, and China—capturing their market performance through the MSCI BIC Index.

This index reflects the significance of these emerging economies, noted for their higher GDP and accessibility to investors. BKF follows a market capitalization-weighted approach, predominantly featuring Chinese equities, followed by Indian and Brazilian stocks, with a total of 677 holdings.

Investors considering BKF should note its characteristics: The ETF displays considerable volatility, typical of emerging markets, with a 30-year standard deviation of 20.89%. Despite this, it holds a beta of 0.45 relative to the U.S. market, suggesting lower correlation and potential diversification benefits.

However, BKF's liquidity is less than that of ETFs tracking U.S. equities due to the lighter trading volume of its underlying stocks, leading to a larger 30-day median bid-ask spread of 0.25%. Additionally, the expense ratio stands at 0.7%, which is relatively high compared to many domestic ETFs.

It's also important to recognize that BKF does not include all BRICS countries, notably excluding Russia and South Africa. The absence of Russian equities is significant, as many Russian ETFs have faced collapse or severe challenges following geopolitical tensions and sanctions related to its invasion of Ukraine.

iShares MSCI South Africa ETF

EZA

+0.65%

Aside from the exclusion of Russia in BKF, investors looking to cover all BRICS countries might consider augmenting their exposure with EZA, which tracks the MSCI South Africa 25/50 Index.

This ETF offers a focused view into the South African market with a relatively narrow benchmark consisting of 32 market-cap weighted companies. The portfolio is heavily concentrated in financials, materials, and consumer discretionary sectors.

Among the top holdings, you'll find a diverse array of leading South African companies:

• Naspers Limited (NPN) is a giant in consumer discretionary, known primarily for its investments in internet companies, including a significant stake in Tencent.
• FirstRand Ltd (FSR) is a major player in the financial sector, providing a range of banking and insurance services.
• Gold Fields Ltd (GFI) represents the materials sector, specifically gold mining, and is one of the world's largest gold mining firms.

As with BKF, it's important to note that EZA is not the most liquid ETF, with a 0.18% bid-ask spread, and it carries an expense ratio of 0.59%.

BRICS+ countries

Among the new BRICS+ countries—Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates—only a few are investable through U.S.-listed ETFs.

Currently, investment opportunities via ETFs are available primarily for Saudi Arabia and the UAE. Notably, there used to be an ETF for Egypt, the VanEck Egypt Index ETF, but it was delisted on March 8, 2024.

For those interested in gaining exposure to these Arab countries, the iShares MSCI UAE ETF

and iShares MSCI Saudi Arabia ETF

KSA

-0.49%

are available options. Both ETFs carry relatively high expense ratios of 0.59% and 0.74%, respectively, reflecting the niche market they cover.

In terms of holdings, both ETFs are heavily weighted towards financial sector companies. For the UAE, notable holdings include Abu Dhabi Commercial Bank and Abu Dhabi Islamic Bank. Saudi Arabia's ETF

is particularly noteworthy as it offers exposure to Saudi Aramco, one of the largest oil companies globally and a security that is otherwise challenging to access for most individual investors.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.