Asia’s equity valuations hit 10.5-year high in June

FILE PHOTO: A pedestrian wearing a face mask rides an escalator near an overpass with an electronic board showing stock information, following an outbreak of the coronavirus disease (COVID-19), at Lujiazui financial district in Shanghai, China March 17, 2020.

REUTERS: The valuation of Asian shares surged to a 10.5-year high in June, tracking a rally in global stocks, as upbeat US 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 gained 4.83 per cent last month, topping the MSCI’s World index’s 3.03 per cent 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 , Hong Kong , the Philippines and Taiwan , gained more than 6per cent 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.

“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.

Z24 News

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