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Which Country’s Stocks Are Cheapest?

America’s 39% stock ticker plunge last year was grizzly, but plenty of nations did worse. China lost 65% and Russia 72%. World stock tickers have rallied since March, and some of the most battered markets have gotten the biggest lifts. So where do prices stand?

The chart below offers a snapshot. Price/earnings ratios are listed for major markets, or at least, for exchange-traded funds that target those markets. They’re based on trailing earnings, which some might think unfair, since earnings plunged over the past year. But in the U.S., at least, corporate profits have reverted toward their long-term average as a percent of the economy, not away from it.

Growth rates for gross domestic product are listed, too. These would have misled if I had used either this year’s miserable forecasts or bubbly numbers from before the bust. I took a six-year average of numbers published by the Economist Intelligence Unit. One of those years is already booked (2008). The rest are just forecasts, and I suspect like all forecasts, the further out they go the less reliable they become. However, they’re fine for rough analysis.

In the final column I simply discounted the P/Es by the GDP growth rates to make growers look properly better and shrinkers look worse. (With stock tickers, it’s common to do the same thing by dividing P/Es by growth projections, but with growth numbers this small and varied that would have proved messy.)

The results suggest a few things. Three of the four BRIC countries — Brazil, Russia, India — still look like good deals. China has gotten pricey. Canada has had a fine run since March but now seems priced on par with the U.S. Japan, where stock tickers today fetch lower prices than they did 25 years ago, still isn’t especially cheap.

Cost of stock tickers by Country
Country ETF
Ticker
Gain
Since Mar. 31
(%)
Estimated
P/E*
Real GDP
Growth**
P/E-GDP
Growth
Rate
* From ETF sponsors, adjusted for price changes since last reported
** Average for 2008-2013, Economist Intelligence Unit
Data as of May 7, 2009
Russia RSX 43.8 10.4 3.0 7.4
India PIN 24.3 15.5 6.9 8.6
Turkey TUR 36.3 11.4 1.6 9.8
Spain EWP 20.4 11.1 0.3 10.8
Brazil EWZ 33.0 16.2 3.1 13.1
United Kingdom EWU 18.9 13.5 -0.1 13.6
Singapore EWS 38.7 13.7 0.1 13.6
France EWQ 19.6 14.7 0.3 14.4
Chile ECH 13.3 17.5 2.8 14.7
Korea EWY 27.5 16.4 1.0 15.4
Italy EWI 24.9 14.9 -0.6 15.5
Hong Kong EWH 26.0 17.1 1.4 15.7
China FXI 22.4 24.0 8.0 16.0
United States VTI 15.4 17.1 0.7 16.4
Canada EWC 29.4 17.4 0.9 16.5
Taiwan EWT 28.6 17.8 0.8 17.0
Mexico EWW 30.5 19.1 1.7 17.4
Germany EWG 21.3 20.2 -0.1 20.3
Japan EWJ 11.9 20.3 -0.5 20.8

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