In October, among the key markets in Europe, Germany's DAX index
increased by 3.67% and France's CAC-40 index rose 1.83%. The FTSE
100 index gained 4.25%. Stock market performance in Japan, China
and Hong Kong were weak. Japan's NIKKEI 225 was down 1.95% and
China's SSE Composite index decreased 1.15%. Hong Kong's Hang Seng
Index was up 1.15%.
On Nov. 4, 2013, Chairman of Oaktree Capital Group LLC,
, said in Shanghai that China's equities are "tremendous bargains"
while U.S. stocks are "fairly to fully valued." He believes just as
investors were too optimistic on China's market three years ago,
now they are too pessimistic. Right now the Shanghai Composite's
price-to-book ratio is about half of 2010's level and the P/E
multiple is 42% lower. "We are investing in Chinese equities along
with emerging markets," Marks said. "Investors have lost all
confidence in China."
The details of how to estimate the future market returns of the
global market, the data sources, the interpretation of data have
all been discussed in great details in our new page of
Global Market Valuations
. Please go to that page if you want to learn more and have
Please note that there are large errors in predicting the future
returns of emerging markets because not enough historical data is
available. These countries may not be able to grow at the same rate
as they did before. But in general, the chance of having better
future returns is higher for these markets that are traded below
historical means than for those that are traded above.
As of Nov. 5, 2013, the expected returns for the global market are
shown in the chart below:
Among developed countries,
has the highest expected market returns.
, Spain and Australia rank from second to fourth place. The
expected returns are in the order of mid-teens a year. Among
developing countries, the Chinese market is still the highest. The
expected return is in the order of 34.6% a year.
Three factors decide the expected returns of the market. They are
economic growth, dividend payment and the current market
valuations. If the current market valuation is below its historical
mean, the contribution from the reversion of the market valuation
to the mean is positive. Otherwise, it is negative.
Among developed countries, contributions from reversion to the mean
for Korea, Sweden, UK, Switzerland, the U.S. and Germany market are
negative because the stock market in these countries are traded
above historical means. For developing countries, those for
Indonesia and Mexico are negative. The details can be seen in the
These are the details of the expected return for the world's
Projected Annual Return
For detailed information and data interpretation, go to the page of
Global Market Valuations.
If you are not a Premium Member, we invite you for a 7-day Free
Trial.About GuruFocus: GuruFocus.com tracks the stocks picks and
portfolio holdings of the world's best investors. This value
investing site offers stock screeners and valuation tools. And
publishes daily articles tracking the latest moves of the world's
best investors. GuruFocus also provides promising stock ideas in 3
monthly newsletters sent to