What are the world’s cheapest stock markets?

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 key metrics that compare price with financial firepower - for example, profits or dividends. ­A lower number generally means a cheaper investment, except when it comes to the dividend yield. Meanwhile, the colours indicate whether a region is expensive versus other areas of the world. 

For a breakdown of what all the figures mean, please head to our glossary. A quick glance at the table shows that the US is the world’s priciest region, however, by every yardstick. In contrast, the UK looks intriguingly cheap.

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.

The trajectory of US equities is particularly striking. After a bumper period for Big Tech, the country’s CAPE ratio is now approaching 40. The only time it exceeded 40 was before the dotcom crash in 2000, according to investment firm Research Affiliates.

China is also worth dwelling on. The region struggled in the aftermath of the pandemic due to problems in the property sector and flagging economic growth. Its stock market has rebounded strongly in the past 12 months, however, and valuations are rising again.

Chart 3: A trip to the US

Analysts tend to wax lyrical about US stocks and mourn the demise of the UK. It wasn’t always this way, however. Just a decade ago, the two countries commanded very similar valuations. The big question is: will the gap close again?

2025 has ushered in some changes. The FTSE 100 has overtaken the S&P 500 this year, driven by strong demand for defence stocks and fears about the US economy. The valuation gap remains stark, however, and London is still struggling to attract new listings.

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. 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.

Chart 5: Best of the rest

So far, we have focused on some of the world’s biggest markets. There are lots of other bourses out there, however, which you might be considering.

Source: Research Affiliates, as of 31.08.2025

You’re unlikely to hold lots of companies listed in New Zealand or the Netherlands. You could easily be exposed to the Indian stock market, however. The region has been hugely popular with investors in recent years, thanks to its strong demographics and burgeoning tech scene. Valuations have been climbing, however, and the Indian market is now one of the most expensive in the world.

• Read: Emerging markets now pass my three investment tests
• Read: History shows investors that it pays to diversify
• Watch: Are we re-running the dot-com crash?

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.