Notwithstanding a recent turnabout, Chinese stocks have soared this year—and so have their valuations. Based on the widely used forward price-to-earnings metric, the Shanghai composite index appears to be the most richly valued major market on Earth.
The index is now trading at a forward P/E of 24.2, according to S&P Capital IQ. That means that for every dollar of earning that analysts expect these companies to make in the next year, investors are willing to pay $24.20.
In fact, the Shanghai composite has the highest forward P/E of any global national index that S&P Capital IQ tracks. Next on the list are the New Zealand 50 index and the Philippines PSE composite index, which enjoy forward P/Es of 20.2 and 19.5, respectively.