"By William Wilson
In recent years, both Chinese and Russian stocks have sold at astonishingly low discounts relative to other emerging markets. While the price-earnings multiple (PE) for the MSCI Emerging Stock Index is hovering around twelve, Chinese and Russian stock multiples have collapsed toward mid-single digits. For the other Brics, India and Brazil, investors have been willing to fork out twice as much money for each dollar of earnings.
After peaking at 26 in 2007, China’s PE ratio has fallen continuously since the financial crisis. China’s collapsing equity valuations appear perplexing given that economic growth remained strong over most of this period (until very recently).
Source: Datastream
After briefly resuscitating after the global recession, PE multiples for Russian stocks (market-weighted average) have fallen below six, making Russia one of the “cheapest” stock markets in the world.
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