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Asia's equity valuations hit 10-1/2-year high in June

Economic IndicatorsJul 06, 2020 03:15AM ET
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© Reuters. Pedestrian wearing a face mask rides an escalator near an overpass with an electronic board showing stock information in Shanghai

(Reuters) - The valuation of Asian shares surged to a 10-1/2-year high in June, tracking a rally in global stocks, as upbeat U.S. and China data renewed hopes of a swift economic recovery, offsetting concerns over rising coronavirus cases.

The MSCI's broadest index of Asia-Pacific shares (MIAP00000PUS) gained 4.83% last month, topping the MSCI's World index's (MIWD00000PUS) 3.03% gains.

Thanks to the rally, the index's forward price-to-earnings (P/E) ratio rose to 15.62 at the end of June, compared with 14.34 a month earlier. This was the index's highest forward P/E ratio since December 2009, according to Refinitiv-Eikon data.

Benchmark equity indexes in India (NSEI), Hong Kong (HSI), the Philippines (PSI) and Taiwan (TWII), gained more than 6% each last month.

New Zealand, India and Malaysia shares were the most expensive in the region, with P/E ratios of 30.7, 19.3 and 17.4, respectively.

Graphic: Asia-Pacific equities performance in June 2020 https://fingfx.thomsonreuters.com/gfx/mkt/qmyvmgbbqvr/Asia%20Pacific%20equities%20performance%20in%20June%202020.jpg

Graphic: Asia-Pacific equities' performance in 2020 https://fingfx.thomsonreuters.com/gfx/mkt/yzdvxrqqevx/Asia-Pacific%20equities%20performance%20in%202020.jpg

Graphic: Valuation of Asia-Pacific equities https://fingfx.thomsonreuters.com/gfx/mkt/azgporaaqvd/Valuation%20of%20Asia%20Pacific%20equities.jpg

Graphic: MSCI Asia and World index's PE https://fingfx.thomsonreuters.com/gfx/mkt/yzdvxraaqvx/MSCI%20Asia%20and%20World%20index%20PE.jpg

"Equity market bulls are looking past the current economic gloom despite not being out of the woods, and being emboldened by the flood of ultra-cheap money," Vishnu Varathan, head of economics and strategy at Mizuho Bank, said in a note.

"Insofar that liquidity, not fundamentals, determines market buoyancy, we must brace for higher latent volatility."

Asian shares scaled four-month peaks on Monday as investors counted on a revival in Chinese activity to sustain global economic growth, even as surging coronavirus cases delayed re-openings across the United States.

Asia's equity valuations hit 10-1/2-year high in June
 

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