If you take stock markets' price to earnings ratio and divide it by their expected growth, then interestingly China and Russia, two of the BRICs turn up as the cheapest stock markets based on this PEG (PE/Growth) method. Obviously growth estimates can be wrong, but this at least opens up the debate:
Bespoke:
Above are the PEG ratios for 22 countries around the world. For each country, we use the trailing 12-month P/E ratio for the index shown as well as estimated 2010 GDP growth. As shown, Russia and China have the lowest country PEG ratios at 1.86 and 1.90, respectively. Russia has a very low P/E at 8 and decent estimated GDP growth at 4.3%. China, on the other hand, has a rather high P/E ratio at 19.24, but its GDP growth is also very high at 10.10%. The US is right in the middle of the pack with a PEG of 5.07. Our neighbors to the south rank just above the US with a PEG of 3.85, while our neighbors to the north rank just below the US at 5.67.
http://www.businessinsider.com/russia-is-the-cheapest-market-based-on-growth-2010-6#ixzz0w02Qccax
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January 28, 2010
Many investors use the PEG Ratio as a valuation tool these days because it puts a company's growth prospects into perspective along with the widely followed price to earnings ratio. The PEG ratio is the P/E Ratio over the Growth Rate, and a PEG of less than one is generally considered good.
In this regard, Bespoke created "PEG" ratios for a number of countries using the P/E ratio of each country's main equity market index along with 2010 estimated GDP growth rates. Just as with stocks, the lower the country PEG, the more attractive.
As shown, India has the best PEG out of the countries we analyzed. It has a P/E ratio of 26.19 and estimated 2010 GDP growth of 8%. While its P/E isn't as low as a lot of countries, its growth rate is very high. China ranks 2nd with a PEG of 3.66.
The U.S. ranks in the middle of the pack with a P/E of 24.53 and estimated GDP growth of 2.6%.
At the bottom of the list sits Switzerland, Italy, and the UK, while Australia, Japan, and Spain have negative PEGs due to either a negative P/E Ratio or negative estimated GDP growth.
http://protect-your-assets.blogspot.com/2010/01/country-pe-ratios-and-gdp-growth.html
Bullbear Stock Investing Notes
Economic PEG = (P/E) / (100*GDP growth)
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