Equities
European equities: Back to politics, navigating these challenges with active investing
Active European equity investing is helping to navigate the complex nature of politics in the region. Find out more.
How do you know if stock markets look cheap or expensive? We have created a Valuation Tracker, which includes an interactive map and a table, that show you how major global equity indices are valued on various financial metrics each quarter.
By clicking on our map, you’ll discover the price-to-earnings (P/E) ratios of stock markets around the world. The higher the ratio, the more expensive a stock or market is relative to its earnings.
But of course, the P/E ratio isn’t the only metric that defines whether a stock’s valuation makes it an attractive investment. There are other metrics, such as price-to-book (P/B) ratios, free cash flow yield or dividend yield that an investor can take into account.
So, we have also built a table that shows you how these metrics are valued on equity indices worldwide. Each quarter we will send subscribers new data.
To put everything in context and give you an understanding of how our managers use valuations in their investment strategies, our experts provide commentary about where the global investment opportunities and risks for equities are over the long-term.
Stay on top of current valuations. We update the value tracker on a quarterly basis.
Find out how the major equity indices around the world are valued on other financial metrics with our table.
At current levels, we believe European equity markets are exceptionally low priced. Both in absolute and relative terms. This is typically a great starting point to generate future returns.
With inflation rates at high levels, but gradually coming down investing is more challenging than usual, and simply investing based on “value” or “growth” factors have become difficult. Therefore, the key to unlocking this potential is to focus on fundamental stock picking.
That means looking for those companies with improving returns and are changing for the better.
Asian markets continue to trade well below their long-term historic average level and at a significant discount to developed markets, particularly the US. We believe there’s scope for this to narrow, and that Asia remains an attractive place to invest over the medium-term, with divergence between countries and sectors providing attractive opportunities.
Given that our investment style is driven by valuations, we’re looking for stocks that are priced below our estimate of their fair value. Inherently, that leads us to lean into areas that are cheaper, relative to earnings or book value, than they have been historically.
Investing in Asia, naturally we’re concerned about geopolitical risks, particularly between China and the US. But we do believe that the geopolitical risks are already factored into the equity risk premium of the companies we’re invested in.
We would note that many US companies are exposed to these geopolitical risks, and this doesn’t seem to be reflected to the same extent in their valuations.
The key advantage to investing globally is the breadth of the investable universe. There's always something going on, from perhaps some sort of financial market issue, which has lowered valuations in any given region. Perhaps some geopolitical tension that's creating issues.
The kinds of companies that we want to be investing in now is where the cash flows and dividends can continue to grow for many years. This ultimately is done off the base of low valuations can provide attractive returns to the shareholders.
Investing globally is really important when considering risk management because some domestic markets can be very skewed in terms of their makeup, either to big companies or big sectors or it can even be more nuanced in terms of factor/covariance risks.
That can drive a degree of correlation bias / unintended risks within any given region. We are very cognisant of this and manage it actively, as such we are pleased to say that the majority of risk is stock specific – this allows us to do what we do best and that is stock picking.
UK equities offer exposure to many high quality, cash-generative companies trading at valuations below global peers, even after taking account of differences in return-on-capital.
They offer compelling income streams and capital growth that can provide a valuable defence against inflation. Sector exposures are very different to other global equity markets – bringing additional diversification benefits.
Key risks would be prolonged global recession, and a return to ‘zero-bound’ inflation and interest rates; to ‘free money’ that was a feature of global markets following the GFC. In such environment cash generative qualities may be de-emphasised in a search for the ‘next big thing’.
Given the Federal Reserve has lowered interest rates, the economic environment should be more accommodative to businesses and consumers. With more certainty about interest rates, investors have recently rotated out artificial intelligence focused companies that had led for much of 2024, and into small cap and value stocks which have the potential to benefit from lower interest rates.
Geopolitical risks from the Russia/Ukraine and Israel/Hamas wars are major concerns, if these wars spread to other countries in those regions. These risks could cause major shifts in the supply and demand of oil prices, affecting the global economy and shocks to the capital markets.
Index | Country | P/E Ratio | P/B Ratio | Dividend Yield | Free Cash Flow Yield |
---|---|---|---|---|---|
US & Canada | |||||
S&P/TSX COMPOSITE INDEX | Canada | 18.24 | 2.00 | 3.20 | 4.68 |
S&P 500 INDEX | United States of America | 25.43 | 4.92 | 1.42 | 3.09 |
Europe | |||||
OMX HELSINKI BENCHMARK | Finland | 13.67 | 1.73 | 5.17 | 5.91 |
CAC 40 INDEX | France | 13.73 | 1.84 | 3.45 | 6.09 |
DAX INDEX | Germany | 14.68 | 1.59 | 3.23 | 7.72 |
FTSE MIB INDEX | Italy | 7.75 | 1.26 | 5.74 | 7.32 |
AEX-Index | Netherlands | 15.66 | 2.35 | 2.67 | 6.27 |
WSE WIG INDEX | Poland | 9.80 | 1.25 | 5.29 | 7.32 |
MOEX Russia Index | Russia | #N/A N/A | #N/A N/A | #N/A N/A | #N/A N/A |
IBEX 35 INDEX | Spain | 10.94 | 1.43 | 4.89 | 4.45 |
OMX Stockholm All-Share | Sweden | 16.17 | 2.10 | 2.91 | 4.99 |
SWISS MARKET INDEX | Switzerland | 19.20 | 3.99 | 3.11 | 5.43 |
FTSE 100 INDEX | United Kingdom | 14.29 | 1.88 | 3.89 | 6.78 |
Asia | |||||
SHANGHAI SE COMPOSITE | China | 13.54 | 1.20 | 3.47 | 1.43 |
S&P BSE SENSEX INDEX | India | 24.00 | 3.86 | 1.41 | 1.93 |
JAKARTA COMPOSITE INDEX | Indonesia | 17.77 | 2.04 | 5.00 | 4.77 |
TOPIX INDEX (TOKYO) | Japan | 14.84 | 1.29 | 2.49 | 4.75 |
PSEi - PHILIPPINE SE IDX | Philippines | 12.23 | 1.55 | 2.78 | 3.43 |
Straits Times Index STI | Singapore | 11.88 | 1.08 | 5.65 | 7.28 |
KOSPI INDEX | South Korea | 13.87 | 0.98 | 2.25 | 2.31 |
TAIWAN TAIEX INDEX | Taiwan | 46.24 | 2.45 | 2.78 | 4.28 |
STOCK EXCH OF THAI INDEX | Thailand | 15.78 | 1.24 | 3.69 | 5.11 |
Oceania | |||||
S&P/ASX 200 INDEX | Australia | 19.34 | 2.26 | 3.73 | 3.90 |
Latin America | |||||
MSCI ARGENTINA | Argentina | 9.32 | 1.08 | 5.92 | -0.29 |
MSCI BRAZIL | Brazil | 9.21 | 1.53 | 7.20 | 11.24 |
MSCI CHILE | Chile | 14.87 | 1.19 | 5.17 | 7.83 |
MSCI MEXICO | Mexico | 14.05 | 1.91 | 4.46 | 6.88 |
South Africa | |||||
FTSE/JSE AFRICA ALL SHR | South Africa | 23.62 | 1.64 | 3.99 | 4.73 |
Source: Bloomberg as at 31 July 2024
The stock market indices used were as follows: United States of America = S&P 500; Canada = S&P/TSX Composite; France = CAC 40; Germany = DAX; Spain = IBEX 35; Switzerland = SMI; Netherlands = AEX-Index; United Kingdom = FTSE100; Italy = FTSE MIB; Poland = WSE WIG Index; Finland = OMX Helsinki Benchmark; Sweden = OMX Stockholm All-Share; China = Shanghai SE Composite; Singapore = STI; Taiwain = Taiwan Taiex; South Korea = KOSPI; Indonesia = Jakarta Composite; Philippines = Philippine SE; Thailand = Stock Exchange of Thailaind; India = Sensex; Australia = S&P/ASX 200; Japan = Topix; Mexico = MSCI Mexico; Brazil = MSCI Brazil; Argentina = MSCI Argentina; Chile = MSCI Chile; South Africa = FTSE/JSE Africa All Share; Russia = MOEX Russia.
At Invesco we have a host of capabilities that cover both value tracking and active valuation-driven investing. We can therefore cater for a range of investment objectives, from simple value diversification to potential valuation-driven outperformance exposure.
European equities: Back to politics, navigating these challenges with active investing
Active European equity investing is helping to navigate the complex nature of politics in the region. Find out more.
Why European equities are attractively valued
European equities are trading at attractive valuations compared to other regional equity and fixed interest markets. Find out more.
UK equities: and now for something completely different
UK equities present distinct and attractive opportunities for both domestic and global investors. Discover why they shouldn't be overlooked.
Stay on top of current valuations. We update this value tracker on a quarterly basis – complete the form to receive notification emails when the latest figures and related articles, are available.
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. Views and opinions are based on current market conditions and are subject to change.