Where in the world are the cheapest stocks?

24 Jul 2015

Christine St Anne is Morningstar's online editor and Emma Wall is the editor of the Morningstar UK website.

Chinese stocks may have taken a recent tumble, but only one month ago Chinese companies were the most expensive in the world.

Alongside China, Ireland, Russia and Japan are currently the most overvalued stock markets, according to Morningstar's quantitative valuation coverage.

Investors can secure quality companies at good prices but would most likely avoid countries such as Nigeria or Pakistan.

The Silver-rated Aberdeen Emerging Opportunities Fund's [17868] uncomplicated bottom-up process seeks out cheap, quality businesses.

Its portfolio has a solid exposure to companies in India, Brazil, Hong Kong, Mexico and South Korea.

Another quality managed fund, the Gold-rated Magellan Global [19563], favours large, established companies in developed markets with global operations that secure offshore earnings.

The fund currently has 10 per cent of its portfolio exposed to the United Kingdom.

The Investors Mutual Australian Share Fund [13352] identifies stocks with predictable and recurring earnings streams at good prices.

Investing in a quality can also help investors steer their investments through tricky times.

The recent halving of the Chinese stock market spooked many an investor, but for an experienced investor like the Gold-rated fund manager Platinum Asset Management (PTM) it is about keeping a focus on the long term.

The Platinum International Equity Fund [4505] has a solid weighting towards Chinese stocks.

While Platinum faces a number of challenges, the firm's founder Kerr Neilson takes comfort from the business economics surrounding the fund's holdings, which have "noticeably outperformed in the sell-off".

Platinum had already factored in a weaker Chinese economy, lowering its growth target from 7 per cent to 4 per cent.