Oct 8 (Businesshala) – Asian equities’ valuations hit a 16-month low at the end of September, as the economic slowdown in China and rising expectations of monetary policy tightening by major central banks dragged equity markets down.
According to Refinitiv data, the MSCI Asia-Pacific Index (.MIAP00000PUS) fell 2.3% last month and had a 12-month P/E ratio of 14.6 at the end of September, the lowest since May 2020.
The MSCI Asia-Pacific Index is down 3.2% so far this year, while MSCI World’s (.MIWD00000PUS) has gained 10.3%.
“Asian equities have been under heavy pressure this year due to declining growth in China, regulatory overhangs on technology stocks and credit issues with Evergrande,” said Suresh Tantia, a senior investment strategist at Credit Suisse.
“Moreover, as growth momentum has been weak, income revisions are returning to normal.”
Analysts cut the 12-month P/E ratio for Asian companies to 0.3% last month, the first cut since June 2020, as manufacturing contracts.
Malaysian and Australian companies each saw the biggest earnings declines of over 2.5%. China saw a 0.3% cut in forward earnings.
With liabilities of $305 billion, China Evergrande Group (3333.HK) has raised concerns that its cash crunch could spread through China’s financial system and resonate globally.
China’s official Manufacturing Purchasing Managers’ Index (PMI) fell to 49.6 in September from 50.1 in August. A reading below 50 indicates contraction.
However, Andrew Gillen, head of Asia East Japan Equities at Janus Henderson Investors, said Asian equities look relatively attractive compared to developed equities after the weakness in the third quarter.
“Outside of China, we are seeing strong performance from markets that are delayed in recovery from COVID-19 and it is appropriate to make a case for this to continue in India and parts of Southeast Asia.”