Asian stocks trade at steep valuation discount to global peers
Reuters
Published Jan 07, 2022 01:33AM ET
By Gaurav Dogra
(Reuters) - Asian shares' relative price valuations hit a more than 18-year low compared to their global counterparts last week, after regional equities dropped in 2021 due to investor concerns over slower growth amid COVID-19-induced curbs. The MSCI Asia-Pacific index's forward 12-month P/E ratio stood at 14.27 at the end of last week, compared with the MSCI World's P/E ratio of 18.31, according to Refinitiv data. That valuation discount of over 22% is the highest since at least June 2003, the data showed.
Graphic: MSCI Asia-Pacific and World index's PE, https://fingfx.thomsonreuters.com/gfx/mkt/jnpwejwqepw/MSCI%20Asia-Pacific%20and%20World%20index's%20PE.jpg Shares in Hong Kong, China and South Korea were the cheapest in the region, with each market having a forward 12-month P/E ratio of less than 11.
Graphic: Valuations of Asia-Pacific equities, https://fingfx.thomsonreuters.com/gfx/mkt/byprjmrzkpe/Valuation%20of%20Asia-Pacific%20equities.jpg The MSCI Asia-Pacific index shed 3.4% in 2021, compared with the MSCI United States' gain of 25.24% and MSCI Europe's 13.75% last year. The parts of the stock markets in Asia that do look cheap on headline multiples are sectors including banks, insurance, or property, said Toby Hudson (NYSE:HUD), head of Asian equity investments, ex-Japan, at asset manager Schroders (LON:SDR).
"These sectors are typically beneficiaries of higher inflation and interest rates, so there may be opportunities for an improvement in returns in the medium term, if inflation is more than just a 'transitory' issue," he said.
"However, these industries face ongoing structural challenges from the rise of fintech and e-commerce in the region, which limits our enthusiasm." According to Refintiv data, analysts have cut the MSCI Asia Pacific index's 2022 earnings for the fifth consecutive month in December.
Graphic: Breakdown by country for estimates changes in last 30 days, https://fingfx.thomsonreuters.com/gfx/mkt/zdpxoqrmmvx/Breakdown%20by%20country%20for%20estimates%20changes%20in%20last%2030%20days.jpg Real estate and consumer sector firms were among those facing the biggest earnings cut in 2022 over the past month, the data showed.
Get The News You Want
Graphic: Breakdown by sector for estimates changes in last 30 days, https://fingfx.thomsonreuters.com/gfx/mkt/gdpzykwzrvw/Breakdown%20by%20sector%20for%20estimates%20changes%20in%20last%2030%20days.jpg "Although there is a catch up expected for Asian companies profit growth, COVID-19 related issues are bound to drag Asia's growth," said Alicia Garcia Herrero, chief Asia Pacific economist at investment manager Natixis. Graphic: Asian companies' estimated profit growth in 2022, https://fingfx.thomsonreuters.com/gfx/mkt/myvmnbgkdpr/Asian%20companies'%20estimated%20profit%20growth%20in%202022.jpg
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.