We recently gathered the current P/E ratios and year-over-year GDP growth numbers for 22 countries that have trackable ETFs. For P/E ratios we used each country's major equity market index. We then calculated the PEG ratio for the country as a whole by dividing the P/E ratio by the GDP growth. As shown below, Singapore currently has the lowest PEG (P/E/GDP) at 1.43, with a P/E of 12.69 and GDP of 8.90%. Singapore is followed by Russia, Malaysia and South Africa. At the bottom of the list with the highest country PEG ratios are the US, Italy and Japan. The S&P 500 has a P/E ratio of 18.39 and GDP growth of just 2.8%. The country with the lowest P/E ratio is Sweden, but its GDP growth is 2.6%, so it is right in the middle of the pack as far as PEGs go. The country with the highest P/E by far is China, but its strong GDP growth gives it a PEG of 3.96.
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Great compilation of statistics - very interesting the value of PE/GDP. - makes one realize that US P/E ratios are not only higher than most of their OECD peers, but also way-way out of line with the current GDP growth.
Would have been even more interesting if the consensus expected growth for the next year was included
Posted by: C&C | December 14, 2007 at 08:06 PM
Investors are aware of the inverse relationship between inflation and P/E ratios. Not many know that relative inflation affects the Earnings-Yield to Bond Yield ratio. As the PPI rise faster than CPI, the EY-to-BY ratio also increases.
This translates to lower P/E's.
You can see this graphically at
"Inflation, the Fed and P/E Contraction"
Posted by: will rahal | December 16, 2007 at 12:32 PM