September 9, 2019 / 10:41 AM / 7 months ago

Asian equity valuations fall to lowest in three months in August: Refinitiv data

(Reuters) - Valuations of Asian shares took a hit in August after a sharp sell-off due to an escalation of the United-States-China trade war.

A woman points to an electronic board showing stock prices as she poses in front of the board after the New Year opening ceremony at the Tokyo Stock Exchange (TSE), held to wish for the success of Japan's stock market, in Tokyo, Japan, January 4, 2019. REUTERS/Kim Kyung-Hoon/Files

A decline of 3.4% in MSCI’s broadest index of Asia-Pacific shares during August pulled down its forward 12-month price-to-earnings ratio to a three-month low of 12.78 times at the end of last month. The July level was 13.1.

(Graphic: MSCI Asia and World forward PE

A lackluster earnings performance for Asian firms in the second quarter - in which 55% of companies in the region missed their consensus earnings estimates - also affected price valuations last month.

In a report last week, Goldman Sachs said its fresh 12-month target for MSCI Asia-Pacific ex-Japan is 515, or 1% below the previous 520 expectation. “The difference is due to further downward revisions to our top-down earnings estimates,” it said.

Goldman also said it maintains its target valuation of 12.9 times forward earnings, which accounts for its baseline scenario of no US-China trade deal until after the 2020 U.S. presidential election.

Due to the fall in P/Es, regional shares were trading at steep discount to their global peers, Refinitiv data showed.

(Graphic: Valuation of Asian equities

China, Hong Kong and South Korea were the lowest-cost shares in the region, with P/E multiples of about 11 or less.

India and Malaysia were the most expensive, with ratios of 15.98 and 15.84 respectively.

Reporting by Gaurav Dogra and Patturaja Murugbaoopathy in Bengaluru; Editing by Richard Borsuk

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