A Look at P/E Ratios by Country: Taiwan Is in a High Rent District

About a month ago, we looked at Year to Date Returns by Country [May 20: YTD Returns by Country, Go Peru!]. Many of those top performers have since come back to Earth. In fact, as we noted Russia is by "official definition" back in a bear market as its >20% off its high (I find this nomenclature system nonsense). Russia was #2 in the world behind Peru YTD at the time of the May posting...

Now Bespoke has an interesting graphic showing PE ratios among some of the major stock markets across the globe. Amazingly, Russia (even after that massive run for the year, and now giving back part of it) is the world's cheapest at 6, but again... in my eyes, Russia is basically like buying a call option on oil. The US is middle of the pack at 14, but I will caution again, PE ratio is more art than science now (trailing, forward, without adjustments, with adjustments, operational, GAAP) so putting 14 on the US is fraught with danger, and I'm sure there are anomalies in many of the other countries. One could make the case that the PE ratio for the US is 130 (trailing! including bank write offs of course) [S&P 500 at 130x Earnings] All that said, it's fun to look at.

It does appear European markets (ex Italy and France) are quite overpriced; I've written that a few times in the past 6 weeks (Germany and the UK are the 2 dominant Euro markets). But valuation analysis appears to be for fuddy duddies in this new era. Personally I am ok with higher valuations if the growth is there to support it... hence seeing the UK at 34x makes little sense while China at 29x is rich but understandable.

And if you believe the comparative data and still think valuations mean something in a computer driven, program trading momentum market; go short some iShares Taiwan (EWT). [remember that huge spike in Taiwan was due to an announcement that mainland China was looking to do direct investments]

Comments

[HaavBline:]

Of EWT's rally from March market bottom, much of it was in sync with the global rally, maybe 1/5th of it can be attributed to the extra optimism about the opening to China's direct investment. (Notice the big spike in May on the chart.)

It seems recent profit taking has corrected that short-term overbought situation and the future Chinese direct investment is again an investable theme for EWT.

Jun 26 11:15 AM

[sheeple123jump:]

I agree

Jul 01 06:26 PM

[sheeple123jump:]

but as a technical analystic trader....I wish it would have retraced down to 9... but the 200 MA is ok....and maybe now,bounce from a double top at 10.5 back to 9.5 and holding there in the coming week.... might make a nice entry point. at 9.5.
would you consider this etf as a 'buy and hold' ?? since it is about the new trade relations cooperation between china and taiwan....sounds like a good long term play.

Jul 01 06:31 PM

[sheeple123jump:]

...just as another look at it.... if it turns negative and becomes a head and shoulders pattern completing...... where do you see the bottom holding ,if it drops as a head and shoulders.... if that were to happen,I might look to place a tight stop at 8 or 8.25

Jul 01 06:35 PM