(Reuters) – Asian equities’ valuations dropped to a three-month low at the end of January, as global investors accelerated selling risky assets on fears over the economic impact of a virus outbreak in China.
MSCI’s broadest index of Asia-Pacific shares’ <.MIAP00000PUS> 12-month forward price-to-earnings ratio (P/E) fell to 13.72, compared with 14.19 at the end of last year, Refinitiv data showed.
By Tuesday’s close, the index had declined about 4.8% from its January high of 175.13. However, some analysts said Asian shares were still not attractive, given a slew of risk factors such as a slowing global economy, U.S. elections and potential for renewed trade tension.
(GRAPHIC: MSCI Asia and World index’s PE – https://fingfx.thomsonreuters.com/gfx/mkt/13/1739/1713/MSCI%20Asia%20and%20World%20index%20PE.jpg)
Markets have clearly started pricing in the dynamics of lower growth, primarily in Asia, Goldman Sachs said this week.
“EM asset valuation has cheapened during the drawdown, but not yet in over-sold territory,” it said.
In January, price valuations of Philippine, Indonesia and Malaysian shares fell sharply.
China, Hong Kong and South Korean shares were the cheapest in the region, with P/E multiples of 8.99, 10.36 and 10.98, respectively.
On the other hand, Indian shares were the most expensive, with a P/E ratio of 16.74 times.
“While history suggests markets will eventually rebound quickly, once the incidence of new cases subsides, the risk-reward seems to have deteriorated significantly,” Citibank said in a note.
(GRAPHIC: Valuations of Asian equities – https://fingfx.thomsonreuters.com/gfx/mkt/13/1736/1710/Valuations%20of%20Asian%20equities.jpg)
(Reporting by Gaurav Dogra and Patturaja Murugbaoopathy in Bengaluru; Editing by Subhranshu Sahu)