China is the top-performing major stock market over the last year, according to new data from MSCI. And even after a very strong rise, it's still the cheapest major market - well, arguably the cheapest major market.

Here's the table:

Returns and valuations of major countries

Country 1 month % 1 year % 3 year % 5 year % Forecast p/e Price/Book Yield %
China 1.1 33.3 12.8 11.2 13.4 2.0 1.7
France 4.3 31.8 8.8 12.0 15.1 1.7 3.1
Germany 5.6 26.8 8.4 10.6 13.7 1.9 2.6
ACWI 2.0 19.3 8.0 10.8 16.1 2.3 2.4
USA 2.0 18.5 10.7 14.2 18.2 3.2 2.0
UK 3.3 14.7 0.8 5.0 14.5 1.8 3.9
Japan 2.1 14.5 8.1 10.9 14.3 1.4 2.0
Source: MSCI. All countries are measured by MSCI indices

Note that the growth figures for the last three and five years are annualised. So, for example, the Chinese market has grown at an annual rate of 11.2% over the last five years. The table also includes the performance of the MSCI ACWI Index which comprises shares in 23 developed markets and 24 emerging markets. The index is very much weighted to developed markets (about 88% by value).

The strong recent performance of the Chinese market is very striking yet the forecast price/earnings ratio is still on the low side at 13.4. However, when you look at the price/book and dividend yield columns, China doesn't look quite so cheap. What's more, China bears continue to highlight levels of debt in China as a concern for investors. It'll be interesting to see if any major new reforms are announced at the next Chinese Communist Party five-year congress later this month.

Looking at the list of price/earnings ratios, the US market, with a p/e of 18.2, is the one that looks expensive and that's only confirmed when you look at the price/book column as well. These figures are clear signs that the US market is expensive, so now probably isn't the time to be an aggressive buyer of US equities. (I've modestly reduced my US holdings in recent months, but I'm going to keep the bulk of my US investments on the basis that I'm investing on a 15-year horizon. Past experience suggests I'm not terribly good at timing the market, so I'm unlikely to reduce my US investments any further.)

Factors

MSCI has also released some data on the performance of its various 'factor' indices. Factor indices are tilted to stocks that are attractive when you evaluate them using a particular factor such as value, growth, momentum or yield. Investing using factors is part of 'Smart Beta' investing.

Returns and valuations of factor indices

Factors 1 month 1 year 3 years 5 years Forward p/e Price/Book Yield
Momentum 2.6% 24.0 11.3 13.0 16.7 2.8 1.7
Enhanced Value 2.4% 23.3 7.0 10.9 9.8 1.1 2.7
ACWI 2.0% 19.3 8.0 10.8 16.1 2.3 2.4
Equal Weighted 1.1% 17.9 6.5 8.9 15.1 1.8 2.4
Quality 1.5% 17.6 10.0 11.7 18.1 5.2 2.1
Factor Mix A Series USD 1.4% 16.6 9.0 11.0 16.2 2.5 2.4
Risk Weighted 0.8% 16.2 6.9 9.0 15.8 1.9 2.6
High Dividend Yield 2.0% 15.4 6.2 8.9 14.2 2.4 3.7
Minimum Volatility USD 0.1% 10.0 9.7 10.5 18.8 2.8 2.5
Source: MSCI

Momentum is the winner over the last year with a 24% rise, narrowly beating enhanced value which rose 23%. In my view, value is probably a better place to be over the next two or three years than momentum. There's a decent chance we'll have a correction or crash over this period and I'd expect value shares to hold up better under those circumstances.