When looking at major country equity valuations, Mexico and Russia jump out as the biggest outliers. Mexico trades on a 12m forward PE ratio of nearly 15, which while hardly bubble territory, is well ahead of Russia at less than 5.
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Some of the difference can be put down to the different sector breakdown of the two countries, over 85% of stocks by weight in the MSCI Russia index fall into the energy, materials and financial sectors, which on a global basis are currently the three cheapest sectors. Mexico on the other hand has a higher weight in consumer staples and telecoms with less than 7% in financials and no energy stocks.
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Despite this, comparing the two countries to their own histories is interesting. Mexico is the only major country with a PE ratio higher than its 10 year average, while Russia’s current PE is more than 40% below its average.
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