Valuations in investing are often relative, with different stocks or entire markets looking cheap or expensive compared with their peers. We’ve carried out some analysis on valuations across international markets to reveal the cheapest and most expensive, based on consensus forecast earnings complied by LSEG.
For each individual market LSEG aggregates consensus EPS (earnings per share) estimates from thousands of analysts worldwide to map the next 12-months of projected earnings and the price investors are paying for them.
LSEG uses a weighted average methodology to aggregate company data to remove extreme outliers skewing the market’s valuation.
As the table shows, the cheapest markets are the UK’s FTSE 350 and the MSCI Emerging Markets index while the US benchmark S&P 500 trades at a significant premium.
Emerging markets trade at a discount to developed markets
Emerging markets can trade on lower valuations because investors tend to apply a discount to account for higher political uncertainty, issues around the way companies are run and less stable economies which tend to be more cyclical.
It is also important to understand that emerging markets are sensitive to the value of the US dollar because a large share of their credit, trade and debt is priced in dollars.
A weaker dollar is generally good for emerging markets because it eases debt burdens, boosts commodity prices and encourages foreign investment.
While higher risk, emerging markets offer higher economic growth driven by younger populations and rising middle classes with growing wealth.
Why has performance started to improve?
Over the last 12-months emerging markets have shown signs of life after a long period in the wilderness.
Some of this reflects a rotation away from the high-flying US market with investors looking to reduce exposure to US ‘exceptionalism’ while emerging markets also look attractive.
Despite being at the centre of global AI and semiconductor hardware supply chains, Chinese, Korean and Taiwanese technology and manufacturing stocks trade at deep discounts to their US counterparts.
Korean stocks continue to perform well with the Kospi index of leading shares making new all-time highs, boosted by strong earnings growth from companies making AI memory chips.
Higher commodity prices tend to benefit emerging economies like Brazil and Chile which export oil, metals and agricultural products while importers like Turkey and India suffer from rising costs and inflationary pressures.
How to get access to emerging markets
A cost-effective way to invest in emerging markets is to buy ETFs (exchange traded funds) which track underlying benchmarks.
The iShares Core Emerging Markets ETF is the largest and best value for money ETF with approximately £31 billion in assets and annual charges of 0.18% a year.
The ETF replicates the performance of the MSCI Emerging Markets index by buying all the index constituents. Dividends are accumulated and reinvested back into the ETF.
UK markets remain cheap
The FTSE 350 index remains one of the cheapest developed markets which partly explains the increasing number of takeovers seen over the last few years.
UK mergers and acquisitions activity has reached roughly $182 billion so far in 2026, more than triple the pace in 2025, which was a blockbuster year for UK takeovers according to AJ Bell.
This shows that while the UK market is no longer in the bargain basement territory of 10-times forward earnings seen three years ago, it is still attracting interest from trade buyers and private equity.
How to get access to UK markets
The cheapest ETF tracking the broad UK market is the Amundi UK Equity All Cap ETF which has an annual charge of 0.04% a year. It features on AJ Bell’s Favourite funds list which is a list of fund options curated by our investment experts.
The ETF tracks the Morningstar UK index, which covers 97% of the UK stock market. Amundi is the one of the largest global asset managers.
Actively managed options include the Fidelity Special Situations fund which is also on the Favourite funds list and has an annual charge of 0.91%.
The fund takes a contrarian approach looking for unloved or overlooked companies and headed up by the experienced Alex Wright, who has a long tenure at Fidelity.
Why is the US market the most expensive?
As the table shows, the S&P 500 trades on almost double the forward PE ratio of the MSCI Emerging Markets index.
Undoubtedly the US is home to some of the fastest growing technology companies at the cutting edge of the AI revolution. Goldman Sacks recently raised its 2026 earnings per share forecasts for the S&P 500, implying 24% year-on-year growth followed by a further 13% in 2027.
While this makes it one of the fastest growing regions in the world, anticipated earnings growth and stock market returns do not always move in lockstep.
Because markets are forward looking, a lot of the projected US growth could already be priced in, although valuations are not necessarily a reliable guide, particularly in the short term, to how markets will perform.
Martin Gamble: Shares and Markets Writer
Martin Gamble is Shares and Markets writer at AJ Bell. He was previously the Education Editor of Shares Magazine. He has been with the business since 2019.
Martin graduated from the University of Kent in...
