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Economy56 minutes ago (Feb 09, 2022 0src:06AM ET)
© Reuters. FILE PHOTO: A man is seen behind an electronic board displaying the Nikkei average and Japanese yen rate againt the U.S. dollar at the Tokyo Stock Exchange in Tokyo, Japan, October srcsrc, 20src8. REUTERS/Issei Kato
By Gaurav Dogra
(Reuters) – Valuations of Asian equities dropped to a 2src-month low at the end of January, as expectations of aggressive policy tightening by the Federal Reserve, and a surge in U.S. bond yields hit the regional stocks. The MSCI Asia-Pacific index’s forward src2-month P/E ratio stood at src3.49 at the end of last month, which was its lowest since April 2020, Refinitiv data showed.
That compares with the ‘s P/E ratio of src7.24.
GRAPHIC – MSCI Asia-Pacific and World index’s PE
https://fingfx.thomsonreuters.com/gfx/mkt/gdvzynnjypw/MSCI%20Asia-Pacific%20and%20World%20index’s%20PE.jpg
Last month, a rise in U.S. yields prompted money outflows from the region, which led to big declines in regional shares. The MSCI Asia-Pacific index shed 4.4% in January, its worst start to a year in six years. China’s declined 7.6% last month, which pulled down its forward P/E ratio to src0.src8, the lowest in Asia.
GRAPHIC – Valuation of Asia-Pacific equities
https://fingfx.thomsonreuters.com/gfx/mkt/lgvdwxamlpo/Valuation%20of%20Asia-Pacific%20equities.jpg
Shares of tech companies in South Korea and Taiwan also faced big losses due to a spike in bond yields, and their forward src2-month P/E stood at src0.34 and src3.33 respectively.
On the other hand, Indian shares were the most expensive in the region, with a forward P/E of 20.42.
However, some analysts said Asian equities look attractive at these levels.
Suresh Tantia, senior investment strategist at Credit Suisse (SIX:) said valuation of Asian stocks have become less expensive and they have been trading at a discount to global equities.
“With an outlook of over 9% EPS growth this year supported by another year of above trend GDP growth, we still expect positive returns over the medium term,” he said.
Anthony Raza, head of multi-asset strategy at UOB Asset Management, said the exports in Asia have been very strong, with the economic flows making Asian equities more attractive.
“We have been underweight or neutral on Asia for the past three quarters, but are now back to overweight Asia. We think they are set to catch up given their previous underperformance.”
GRAPHIC – Breakdown by sector for Asia-Pacific equities’ valuations
https://fingfx.thomsonreuters.com/gfx/mkt/klvykmbakvg/Breakdown%20by%20sector%20for%20Asia-Pacific%20equities’%20valuations.jpg
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