The cheapest stock markets in the world

Important information - investment values and income from investments can go down as well as up, so you may get back less than you invest.

This table is a good starting point for value-hunters. It contains six valuation metrics that each compare a stock market's price with its financial firepower - for example, its profits or dividends. A lower number generally means a cheaper investment, except when it comes to the dividend yield. The colours indicate whether a region is expensive versus other areas of the world. 

A quick glance at the table shows that the UK looks intriguingly cheap. In contrast, the US is the world’s priciest region by every measure. After a bumper period for Big Tech, America’s CAPE ratio is now at 40. The last time it exceeded 40 was before the dotcom crash in 2000.

The CAPE ratio is a more sophisticated version of the price/earnings ratio. It looks at a stock market’s profits from the past 10 years, takes an average, and adjusts it for inflation. It then compares this number with the current share price. By using a decade’s worth of profits, it aims to smooths out the ups and downs of economic cycles and give you a long-term view of valuation.

For a full breakdown of what the figures mean, please head to the glossary below or to our investing jargon buster. 

Chart 2: History lesson

It’s all well and good comparing regions with one another - but history matters too.

The chart above shows that the world’s key stock markets have got more expensive in recent years - except for the UK, which is trading in line with its 10-year average. 

This has not gone unnoticed. A wave of takeover activity has seen private equity firms swoop on London-listed companies. Most recently, FTSE 100 group Intertek has entered takeover talks with buyout firm EQT.

•    Watch: Alex Wright - It’s a myth that UK shares have a problem

Personal investors are also intrigued. Recent research by Fidelity found almost half of UK retail investors expect to increase exposure to their home market over the next 12 months, compared with 31% for emerging markets and 29% for the US.

Chart 3: A trip to the US

A decade ago, US and UK valuations were similar. Since then, they have diverged dramatically. But can the gap ever close again?

2025 and 2026 have ushered in some changes. The FTSE 100 overtook the S&P 500 last year, driven by strong demand for defence stocks and miners, plus fears about the US economy and a Big Tech bubble. 

Conflict in the Middle East now looms large. The UK is home to lots of defensive sectors - such as utilities, consumer staples and healthcare providers - which have tended to perform well during past oil spikes. On the flip side, the US is less vulnerable to commodity price rises as it produces much of its own oil and gas. Its technology sector is also rallying after reporting huge profit growth for the first quarter of 2026. 

In recent weeks, the two regions have begun to part ways again. 

Chart 4: The price of everything and the value of nothing?

Price is important. But life teaches us that it’s not always wise to pick the cheapest option. A ‘bargain’ second-hand car isn’t so appealing when you’ve stuttered to a halt on the hard shoulder. The same logic applies to investing. A higher price can indicate higher quality, or better growth prospects.

Valuation metrics cannot be studied in a vacuum, therefore. Put bluntly - some markets contain better companies than others, and this needs to be balanced against the price you are being asked to pay.

The graph above shows how regions compare from a ‘quality’ perspective as opposed to a valuation perspective. Return on equity, for example, indicates how effectively companies use shareholder money to generate profit. The US is streets ahead of the rest. In contrast, Japan - which has been dogged for years by deflation and corporate governance issues - is a laggard.

This helps to explain how valuation gaps have emerged. 

Chart 5: Best of the rest

Source: Research Affiliates, data up to 30.4.26

This table sets out the world’s cheapest and priciest markets, based on their CAPE ratios. A clear trend has emerged: tech heavy markets, such as the US, Taiwan (home to TSMC) and South Korea (home to Samsung) are among the highest valued. 

These differences reflect contrasting expectations. Ultimately, when assessing any valuation metric, investors are making a call about quality and growth. If a company, region or sector is expected to grow quickly and sustainably, it will tend to command a higher valuation. It is when doubts creep in that problems can arise.

The CAPE ratio also has an important drawback. If earnings have recently grown very quickly - or are expected to shoot up in future - a company or region may look unfairly expensive. This is because its price will reflect profits that were not present years ago. This may be the case for South Korea, whose fortunes have improved markedly over the past year due to excitement around its semiconductor industry. 

Got a burning question you want to ask? Why not drop us a line. Click here to ask your question. 

• Read: The cost of waiting for the ‘right’ time to invest
• Read: What is a realistic return to expect from your investments?
• Read: Top 10 best-selling ISA and SIPP funds in April

Glossary

CAPE: This stands for ‘cyclically-adjusted price/earnings’. It is calculated by dividing a stock's current share price by its average, inflation-adjusted earnings over the past 10 years.

It aims to provide a long-term perspective on market valuation by ironing out short-term fluctuations in earnings caused by economic cycles.

This metric is more nuanced than a traditional price/earnings ratio and is fiddly to calculate yourself. 

Dividend yield: This shows what kind of income companies offer relative to their price. It involves taking a company’s annual dividend per share payment and dividing it by the share price. The higher the number, the more generous the company.

A dividend yield that is too high can be a red flag, however, as it may suggest the market thinks payouts are about to be cut.

Enterprise value: This is an alternative to market cap which considers a company’s wider financial structure - specifically, whether they have lots of debt or lots of cash. To calculate enterprise value, take a company’s market cap and add on any debt it has (for example, loans or bonds). Then subtract any cash they have on the balance sheet.

Enterprise value is often viewed as more accurate representation of value than market capitalisation. In essence, it shows how much money someone would need if they wanted to acquire the entire company.

Enterprise value/Ebitda: This metric compares enterprise value with earnings power. Much like the price/earnings ratio, it shows how much investors are willing to pay for a company relative to its profits. Again, the lower the number, the cheaper the stock.

Ebitda is simply a rough measure of cash profits. It stands for earnings before interest, tax, depreciation and amortisation.

Price/earnings: This is the most commonly used valuation metric. To calculate it, you take a company’s share price and divide it by its earnings per share. The higher the number, the more expensive the company, and the more growth investors expect. A fast-growing technology firm will likely command a higher price/earnings ratio, for example, than a mature tobacco stock.

The ratio is of limited use when viewed in isolation, but it’s useful for comparison. For example, how does BP’s price/earnings ratio compare to that of Shell? And how has a company’s price/earnings ratio changed over time?

You may hear investors refer to the ‘forward’ price/earnings ratio. Don’t be alarmed: this version of the ratio simply uses earnings per share forecasts, as opposed to past figures.

Price/sales: To calculate this metric, take a company’s share price and divide it by its revenue per share. Again, the higher the number, the pricier the stock.

There are some obvious pitfalls here. A company may make fabulous revenues but be unable to turn a profit. Relying on this metric to spot bargains, therefore, can be dangerous. It does have its uses, however. Price/sales is often used for young companies that are not yet generating significant profits. For example, fast-growing tech start-ups.

Price/book value: This metric draws on balance sheet strength to assess value. ‘Book value’ is another name for net assets - a company’s assets minus its liabilities.

To calculate price/ book value, therefore, you divide a company’s share price by its net assets per share. A price/book ratio of less than 1 might indicate that the company is undervalued, as its market price is less than its net asset value.

The price/book ratio is often used for balance-sheet driven businesses such as banks. Bank’s earnings bounce around from year to year, but net assets tend to be more stable, making them a better anchor for calculating the valuation.