Cheapest Stocks Get Cheaper After 10% Global Rally

Even after global stocks rallied 10 percent last year, valuations around the world fell the most in a decade, leaving companies in Norway, Italy and Mexico the cheapest of all.

The average price-earnings ratio of global equities dropped as profits in the 45-nation MSCI All-Country World Index rose faster than the gauge, which has rallied to the highest level since August 2008, data compiled by Bloomberg show. Investors are finding bargains outside the U.S., where the biggest two- year rally since the Internet boom has sent the Standard & Poor’s 500 Index’s income multiple to almost a seven-month high.

Of the 45 nations in the all-country index, only Egypt and Ireland will see earnings fall this year, according to analyst estimates compiled by Bloomberg. That’s the fewest since 2004. The gauge rose 0.2 percent to a two-year high on Jan. 14, completing its seventh straight weekly advance, after European officials stepped up efforts to solve the debt crisis and Japan pledged to buy bonds to aid Ireland and Greece. The measure slipped 0.2 percent at 10:30 a.m. in London today.