Australian stocks are cheaper than US and Chinese counterparts but may keep falling due to global lack of confidence.
Australian stocks are cheaper than their United States and Chinese counterparts, however they may continue to decline due to a lack of confidence globally.
Shares on the All Ordinaries traded at an average price to earnings (PE) of 10.41, down from a long-term average aggregate of around 14.
This compared to the key US benchmark, the S&P 500, which traded at an aggregate PE of 23.4 while China's was 26.4.
"Emerging markets, in spite of an 18 per cent fall in the MSCI index since the start of the year, are still relatively expensive," a State Street Global Markets (SSGM) report said.
But Australian stocks may continue to fall because of a global decline in confidence, caused by the sub-prime crisis which has forced banks worldwide to absorb $420 billion in losses.
US securities giant Merrill Lynch reported a much bigger than expected US$4.65 billion loss on Friday which is expected to wilt confidence in financial shares globally.
"With more write-downs expected from banks, any serious deterioration in the macroeconomic backdrop, such as stalling growth and surging inflation, could spark another period of risk aversion," SSGM's report said.
The All Ordinaries index had declined 62 points to 4915 points on July 18. The index is down 28 per cent from its best-ever close of 6853 in November 2007.
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