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(Richard Drew/Richard Drew/The Associated Press)
(Richard Drew/Richard Drew/The Associated Press)

Market Blog

The real bargains are overseas Add to ...

If you think the recent stock sell-off made equities look cheap in this country, you ain't seen nothin'.

For anyone who is serious about snapping up markets that offer dirt-cheap price-to-earnings multiples, North America isn't the place. You'll want to go shopping the bargain bins in Europe.

Vincent Delisle, strategist at Scotia Capital in Montreal, says in his latest Global Valuation Monitor report (published Monday) that Europe-wide P/Es (based on forward 12-month profit forecasts) have dropped to a tiny 8.4 times - far below the MSCI World All-Countries Index multiple of 10.8 times. The MSCI figure is itself approaching lows last seen in the first quarter of 2009 - in other words, at the trough of the bear market.

The P/E for the German market sits at 7.7, France is at 8.1 and Britain is at 8.6. The only market of note with a P/E in line with the world average is Switzerland - the rock of stability in Europe - with a P/E of 10.8.

Meanwhile, despite all the selling here in North America, the P/E for U.S. benchmark S&P 500 matches the global level of 10.8 times. Canada, relative to most of the world, looks downright pricey, at 12.3 times for the S&P/STX composite index. This despite the Canadian P/E level having fallen from more than 16 in the past six months - one of the sharpest declines in the world.

Mr. Delisle said that on a global sectoral basis, the biggest P/E multiple declines in the past six months have come from energy and materials - which explains why the Canadian market's P/E has been one of the world's steepest decliners. P/Es for global energy stocks are 3.4 points lower than they were six months ago (at 8.4), while materials are down 2.4 points (at 9.0).

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