Emerging markets: Sensex ranks 7th

China's Shanghai Composite, with a gain of 141.20 per cent, was the best performing index in 2006-07 among Asia's emerging markets, while the BSE Sensex ranked the seventh, giving an annual return of 16.35 per cent.

All the indices of the emerging and the developed markets peaked to their record highs in February.

The Shanghai Composite Index was followed by the Philippines' PSE Composite (44.45 per cent), Indonesia's Jakarta Composite (37.09 per cent), Malaysia's KLSE Composite (34.24 per cent) and Singapore's Straits Times Index (26.54 per cent).

The MSCI EM Asia Index registered an annual growth of 23 per cent, while  Thailand's SET Index was down 6.19 per cent during the same period.

Pakistan's Karachi 100 index slipped nearly 2.31 per cent in the same period.

Among the developed markets, the Hong Kong index, the Hang Seng, gained 24.60 per cent, the US indices, the Dow Jones and the Nasdaq Composite, rose 10.74 per cent and 6.78 per cent, respectively, the FTSE 100 index went up almost 6 per cent, whereas the Nikkei 225 grew by mere 2.47 per cent.

The market valuation of Indian stocks is currently the second highest among the emerging markets' scrips, with the Sensex trading at a price-to-earnings (P/E) multiple of 23.27 times the trailing twelve months earnings. The Jakarta Composite of Indonesia trades at a P/E of 25.17.

The BSE Sensex is the costliest among the emerging markets in relation to the forward P/E of 16.58 times the estimated earnings for 2007-08. The Jakarta Composite ranks the second with a forward P/E of 13.89 times.

With the Sensex level of 12,100-plus, the Sensex P/E of 23.16 is ranked at number four after the Nasdaq (P/E of 34.24), the Nikkei 225 (P/E of 37.60) and the Shanghai A shares (P/E of 29.40). Thailand's SET is the cheapest among the emerging and the other major international markets with a P/E of 10.22 times.

The Hang Seng of Hong Kong is currently trading at 15.60, while its forward P/E for FY08 is estimated lower at 14.44. The Jakarta Composite of Indonesia, which trades at 21.53 times now, has a lower forward P/E at 13.89 times. The KOSPI of South Korea trades at a P/E of 12.66, with its forward P/E trading at 11.45.

According to analysts, the Indian stocks are getting better valuation than those of the Asia-Pacific market largely on account of their good fundamentals and future growth in earnings.