The valuation of Asian shares surged to a near 11-year high in August, Refinitiv data showed, thanks to an increase in global liquidity and emerging signs of economic recovery in some parts of the region.
The forward 12-month price-to-earnings ratio (P/E) for MSCI’s broadest index of Asia-Pacific shares was 16.71 last month, the highest since October 2009. The index itself gained 4.9% in August and hit a two-year high.
That was still less than the P/E ratio of 20.15 for MSCI’s global stock index, which gained 6% last month.
Analysts said surveys showing Chinese factory activity expanded at the fastest rate in nearly a decade in August had boosted Asian shares last month.
India and Australia shares were the most expensive in the region with P/E ratios of 20.68 and 17.4 respectively.
Graphic: Valuations of Asian-Pacific equities https://fingfx.thomsonreuters.com/gfx/mkt/xegvbowlzpq/Valuations%20of%20Asian-Pacific%20equities.jpg
Graphic: MSCI Asia and World index’s PE https://fingfx.thomsonreuters.com/gfx/mkt/xklvynobepg/MSCI%20Asia%20and%20World%20index%20PE.jpg
Amish Shah, India equity strategist at Bofa Securities, said India’s valuation premium to other emerging markets of 50% was still less than its all-time peak of 73%.
“Lower premium to some extent reflects the risk of high (coronavirus) infections impacting economic growth near term. That said, we do believe that the markets would consolidate in the near term since large sectors such as IT, Telecom, Pharma now offer limited scope for further upside,” he added.
China and Hong Kong shares were the cheapest in the regions with P/E ratios at 11.24 and 11.67.
Graphic: Asia-Pacific equities performance in 2020 https://fingfx.thomsonreuters.com/gfx/mkt/xlbpgldwavq/Asia-Pacific%20equities%20performance%20in%202020.jpg
Graphic: Asia-Pacific equities performance in August 2020 https://fingfx.thomsonreuters.com/gfx/mkt/rlgpdoexdvo/Asia%20Pacific%20equities%20performance%20in%20August%202020.jpg
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