| |
|
|
|
|
 |
| Across the globe, all of the indexes
have fallen over the past 30 days, demonstrating once
again that global diversification does not protect
against short-term market declines. European markets
were heavily impacted, with many indexes posting price
drops of 10% or more. The US fared well by comparison,
with just a 6.3% decline.
Despite the recent correction, emerging
markets still have large gains as compared to prices
a year ago. Valuations are less favorable, with investors
now accustomed to paying a premium for the expected
high growth of these investments. However, the top
two entries on our list, S. Korea and Taiwan, defy
this trend by having both high recent returns and very
low valuations.
Some speculate that the low valuations
in Europe are due to strong currencies and/or low
growth expectations. Whatever the cause, the PE ratio
of the UK index has now fallen to 12.5, 17% lower
than that of the US, and 33% lower than China’s
average PE. Belgium’s PE ratio is even lower
and France’s only slightly higher. |
 |
|
| High earnings growth in both developed
countries and emerging markets has helped push global
equity prices much higher in the past year. During
that period, earnings in emerging markets have increased
almost 18%, as compared to 11% for developed countries.
However, in recent weeks, the global equity correction
has pushed valuations lower, and PE ratios are now
only 13 to 15 on average.
In some markets, it can be argued that
prices have moved far ahead of earnings and valuations
have risen too quickly. China is a well-known example,
but Mexico, Singapore, and Malaysia also have yearly
returns in the 30% to 50% range, while earnings growth
has been much more modest, at only 13% to 17%. PEG
ratios for all of these indexes would be 2 or 3, while
for many other countries, the ratio would be one or
less.
Taiwan and S. Africa stand out as potential
values. Earnings growth in both countries has been
extremely high, but prices have not risen fast, resulting
in very reasonable valuations. In Europe, Spain and
Italy would also meet the same criteria. For the largest
developed economies, the UK has about the same level
of earnings growth as the USA, but has the significant
pricing advantage of a 20% lower valuation |
 |
| PlanetQuant is a professional collaboration between
a financial writer and
researcher, a Silicon Valley computer
scientist, and an award-wining multimedia
developer. Every two weeks, these three combine their
talents to provide an update on the world's market indexes
and always welcome any feedback and discussion. You may
read their more detailed bios via the links above. |
 |
ETF prices are compiled daily from Yahoo Finance/Morningstar
data. Monthly valuation ratios from IndexUniverse are used and
then adjusted based on daily price changes. Correlations are based
upon one year, and volatility is based upon twenty-two market days.
The scores from 0 to 4 represent the average of the three
normalized variables for a category. For example, a valuation
score of 3 for a country indicates that, on average, the three
valuation variables (p/e, p/b, and p/cf) are one standard deviation
lower than the averages for the group.
|
|
|
