Asian stocks are looking expensive. Which could be good for U.S. shares

08/13/2009 11:28 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

Asian stocks were rallying again as I wrote this about midnight New York time on Wednesday August 13.

Nothing really surprising about what kind of companies were leading the move. Gainers included miners (BHP Billiton (BHP), the world's largest mining company), commodities trading companies (Japan's Mitsubishi), and construction companies (such as Australia's Leighton Holdings.)

In other words, the "global economy is recovering" theme is still driving stocks.

As long as Asian markets believe, they should be able to drag the U.S. stock market higher too. A global economic recovery certainly isn't bad news for U.S.companies in the commodities, construction, and export sectors.

But the relative valuations in Asian and non-Asian stock markets may help U.S. stocks too.

The MSCI Asia Pacific Index is now up about 62% from its March 9 low.

That's enough to make Asian stocks relatively expensive in comparison to other equities. Stocks in the Asian index are trading at about 25 times estimated earnings, Bloomberg.com calculates. The MSCI World Index, on the other hand, is trading at a mutltiple of 17 times expected earnings.

So think of it this way, iI you want to invest in the globl recovery theme, you have a choice of Asian leaders at 24 times earnings or U.S. or European laggards in the same sectors at a much lower multiple.

See why Asia's rally could increasingly rub off on other world markets?

Now lets hope the global economy is actually recovering from its slump.

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