Loading...
Symbols:
Authors:

Keeping Score of Global Stock Markets' Returns and Valuations

by: Prieur du Plessis May 09, 2008 | about stocks: DAX / DIA / EEM / EWH / EWQ / FXE / FXI / QQQQ / SPY / UDN    
Prieur du Plessis

Prieur du Plessis

About this author: By this author:
Become a Contributor Submit an Article
  • Font Size:
  • Print

Global stock markets have experienced a relatively strong recovery since the middle of March. Although markets in general are still well below previous highs, it makes for interesting reading to reflect on the extent of the correction and subsequent rally.

As illustrated by the table below, the MSCI World Index is still 9.5% down from its high of October 31, 2007 after its 18.1% drop to a low on March 17, 2008 and a subsequent 10.5% improvement.

The MSCI Emerging Market Index (EEM) fared better by recovering by 15.8% since a 22.2% drop to a low on January 22, 2008, but is still 9.9% down from its previous high.

click to enlarge

Within the emerging markets category, the Chinese Shanghai Stock Exchange Composite Index turned out to be the biggest loser with a decline of 49.2% to its low on 18 April 2008. The Index managed to recover by only 15.7% and is still 41.2% down from its previous high. The Hong Kong Hang Seng Index put in a better performance, dropping by 33.4% to its low on March 17, 2008 and recovering by 21.5% since. The Index is therefore still 19.1% lower than its previous high.

The biggest surprises (at least in local currency terms) were the U.S. and the U.K. stock markets, as these countries’ economies were the most affected by the credit crisis.

  • The Dow Jones Industrial Index dropped by 17.1% to its low on March 10, 2008, but has already recovered by 9.1%, and is now down 9.5% from its previous high.

  • The S&P 500 Index declined by 18.6% (a little more than the Dow Jones Industrial Index) to its low on March 10, 2008. The Index has gained 11.0% since hitting bottom, and is down 9.4% from its previous high.

  • The U.K. FTSE 100 Index dropped by 19.6% to its low on March 17, 2008, but has recovered 16.6% and is now down only 7.0% from its previous high.

    • The comparison of returns in local currency terms provides a distorted picture as the declining U.S. dollar has negatively impacted returns for non-U.S. dollar investors. The two tables below show returns in euro and U.S. dollar terms respectively.

    click to enlarge

    click to enlarge

    Comparing historical returns makes for interesting reading, but becomes more meaningful when read alongside valuation tables. David Fuller (Fullermoney) compiled a very useful table (pdf file) of 96 global stock market indices ranked in ascending order by price-earnings [P/E] multiples and in descending order by dividend yield [DY].

    Not surprisingly, P/Es rose somewhat in the last month, in tandem with a number of stock markets moving above their February highs. However, European indices continue to dominate the table when arranged according to P/Es and globally very few markets have moved to new highs following the December/January correction. Most noteworthy were South Africa and Brazil.

    Some of the Middle Eastern markets also remain at elevated levels having remained insulated, so far, from the travails of other indices.

    Fuller said:

    For the most part, this earnings season has not resulted in a swathe of missed estimates and stock market performance has been most responsible for increased multiples.

    Related Articles

    This article has 3 comments:

    •  
      May 09 10:41 AM
      The U.S. and U.K. market results are only "surprising" if you assume the economy and the speculative markets are joined at the hip and move in lock step ~ obviously they are not and don't.
      Reply
    •  
      May 09 10:54 AM
      actually the footsie 100 peaked at 6,930 Dec 30 1999 and has not been back there since. the motley fool has a piece

      www.fool.co.uk/news/Co...

      says with dividends added you would have no capital loss today just zero return over all this time!

      isn't the footsie in a bear market?
      Reply
    •  
      May 30 04:58 AM
      Bill - I agree with your comment.I don't think that the US and British economies are tied to one another like everyone thinks. In the housing market, they have stricter lending standards than the US and even today house prices are not crashing as they are here.
      Reply
    More Comments on EEM »
    More by Prieur du Plessis

    Investment Resources
    Money Management 

    Research 

    Seeking Alpha provides these ads as a service to its leading contributors
    Articles on related themes
    Market Outlook 

    Economy 

    Dollar/Currencies 

    European Stocks