Country PEG Ratios -- Russia, Singapore, Malaysia Top the List

Many investors look at a stock's PEG ratio as a valuation metric that takes growth expectations into account.  The PEG ratio is a stock's P/E ratio divided by its estimated growth rate.  Generally, a PEG of less than 1 is considered positive because growth estimates are higher than the stock's P/E. 

With that in mind, we created a PEG ratio for major countries using the P/E ratio of each country's major equity index and its estimated GDP growth in 2008.  While some countries have a low P/E ratio, they also have low growth prospects (Spain and France), so their valuations are not as attractive.  Countries that are the most attractive are ones with low P/E ratios and high GDP growth, giving them a low PEG ratio.  Countries that are the least attractive have high P/E ratios and low growth prospects. 

Below we highlight the country PEG ratios for 22 countries that have trackable ETFs.  As shown, Russia tops the list with a P/E of 11.17 and estimated GDP growth of 6.8%.  This gives Russia a country PEG of 1.64.  Other countries with strong PEG ratios include Singapore, Malaysia, Hong Kong, India and South Africa.  Unfortunately, the US is second to last on the list with a PEG of 10.26.  The S&P 500's P/E ratio is 18.46 while its estimated GDP growth this year is 1.8%.  The US is barely ahead of Japan, which is last on the list with a PEG of 10.31.

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