The MSCI (Morgan Stanley Capital International) Emerging Market Index captures large and mid-cap representation across 23 Emerging Markets countries with 823 constituents. The index covers approximately 85% of the free float-adjusted market capitalization in each country. The index was launched in 1988.
Emerging Market countries in the index mainly include: China, South Korea, Taiwan, Brazil, South Africa followed by others in relatively small proportion individually.
The index is based on the MSCI Global Investable Market Indexes (GIMI) Methodology—a comprehensive and consistent approach to index construction that allows for meaningful global views and cross regional comparisons across all market capitalization size, sector and style segments and combinations. This methodology aims to provide exhaustive coverage of the relevant investment opportunity set with a strong emphasis on index liquidity, investibility and replicability. The index is reviewed quarterly—in February, May, August and November—with the objective of reflecting 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 and mid-capitalization cut-off points are recalculated.
The index is calculated using the Weighted Average Market Capitalization methodology where the price multiplied by the free float gives the market capitalization of its constituents. The weightage of each company is arrived at by dividing the market capitalization of each company with the total market capitalization of all the 823 companies. The larger the market weightage of the company the larger is the impact due to 1% change in its price on the index.
Financials at 26.87% followed by Information Technology at 17.2%, Energy at 10.81%, Consumer Discretionary at 9.01%, Materials at 8.95%, Consumer Staples at 8.41%, Telecommunication Services at 7.03%, Energy at 4.05%, Industrials at 6.49%, Utilities at 3.52% and Healthcare at 1.71% for the sector allocation in the index.
The Country specific weights has China at 18.63% followed by South Korea at 16.05%, Taiwan at 12.06%, Brazil at 10.75%, South Africa at 7.67% and other countries at 34.84%.
The MSCI Emerging Market Index has given a return of 4.27% on a year on year basis and has gained 3.49% on a month on month basis. The index has a Price to Earnings ratio of 12.54 in the current scenario. Samsung Electronics company of South Korea has the highest weightage of 3.99% in the index followed by Taiwan Semiconductor MFG with a weightage of 2.51%, Tencent Holdings Ltd. of China with 1.84%, China Mobile with 1.51% and China Construction BK H at 1.35% while others have less than 1.2% weightage each in the index.
Top Ten Constituents for MSCI Emerging Markets Index