The relative value valuation of Asian equities compared to their global counterparts is at a nearly 14-month low, data shows, following their underperformance this year due to slow growth and concerns over the spread of the delta-version of the coronavirus.
According to Refinitiv data, the 12-month P/E ratio of the MSCI Asia-Pacific Index stood at 14.9 compared to the P/E ratio of MSCI World of 18.46. The data shows that around 20 per cent valuation discount is the highest in 14 months.
PE of the MSCI Asia-Pacific and World Index
Changes in MSCI Asia-Pacific Index estimates
The MSCI Asia-Pacific Index is up only 3.37 percent this year, while MSCI United States’ gains are up 19.7 percent this year and MSCI Europe’s 12.9 percent.
However, the Asia-Pacific index has gained 4.4 per cent over the past two weeks on hopes that the US Federal Reserve may delay the start of reducing its asset purchases and maintain its broad monetary policy for the near term. could.
“U.S. equities so far have had an incredibly nearly 35 percent premium over Asian equities, which is higher than the average discount over the past 20 years,” said Sean Taylor, APAC’s chief investment officer at DWS.
“We may see a reverse in trends next year as the rest of the world moves towards tighter monetary policy driven by strong recovery and inflationary pressures, while China increases fiscal spending with more liquidity provision.”
Some analysts said Asian stocks are attractive at these levels and the recent uptick in vaccinations and rising domestic consumption levels in the region could turn around.
“Asian equities are owned by institutional investors. Within EM, investors are underweight from EM Asia and overweight by Latin American equities,” said Manishi Raychaudhuri, Asia-Pacific equity strategist at BNP Paribas.
“Given Asia’s strong growth outlook, the listed presence of tech and consumer megatrends, and low balance sheet risk, such a stance in Latin America is surprising to us,” he said.
The data shows that China, Hong Kong and South Korea have the lowest P/E ratios.
Valuation of Asia-Pacific Equities
Sector wise are the cheapest in the financial and real estate sector.
Meanwhile, Asian firms continued to receive earnings recovery in August, data showed, highlighting continued expectations of earnings recovery in the region.
Country-by-country analysis for changes in estimates over the last 30 days
Sector-wise analysis for changes in estimates over the last 30 days
This News Originally From – The Epoch Times