At the end of January, Asian shares fell to a 21-month low. Expectations of a tighter aggressive policy by the Federal Reserve and rising U.S. bond yields hit regional stocks. The MSCI Asia-Pacific 12-month P/E ratio was 13.49 at the end of last month. This was the lowest since April 2020. This compares the MSCI World Index P/E ratio to 17.24. Last month, rising U.S. revenues led to an outflow of money from the region; This resulted in a significant drop in regional stocks. The MSCI Asia-Pacific Index fell 4.4% in January, the worst start in the last six years.
The Shanghai Composite Index fell 7.6% last month. This reduced its previous P/E ratio to 10.18, the lowest in Asia. Shares of tech companies in Taiwan and South Korea also suffered heavy losses due to rising bond yields. Their previous 12-month P/E was 10.34 and 13.33. On the other hand, Indian stocks were the most expensive, with a P/E of 20.42. However, according to some analysts, Asian stocks look attractive at this level.
According to a senior investment strategist at Credit Suisse, valuing Asian stocks has become less expensive; They traded at a discount on global stocks. With a prospect of more than 9% growth in EPS this year; Supporting another year of trending GDP growth. Positive income is expected in the medium term. According to UOB Asset Management’s multi-asset strategy manager, exports to Asia were robust. Economic flows even made Asian stocks more attractive. The last three quarters were neutral in Asia; however, there are prospects to return to overweight Asia.
European stocks may open in positive volume on Wednesday. Investors are expecting key U.S. inflation data to be released on Thursday. The FTSE index is 58 points higher at 7,615; The DAX is up 10,338 points by 102 points. CAC 40 48 scores to 7.071; And the FTSE MIB 180 points above 26,586. On Thursday, the U.S. Department of Labor plans to release its January Consumer Price Index; Which investors eagerly await.
Inflation data show that prices rose 0.4% in January; In total, it increased by 7.2% compared to the previous year. This will be the head rate in 40 years. A more robust January employment report will follow the question. This has led to speculation that the Federal Reserve may be more aggressive regarding hiking rates. Bank of America said Monday that the Fed could raise interest rates by seven-quarters of a percentage point this year.
Overnight, Asia-Pacific stocks rose. Hong Kong stocks lead the region; While U.S. stock futures rose slightly in overnight trading; Because investors are preparing for the next round of corporate income. Busy Revenue Day in Europe, Siemens Energy, Deutsche Boerse, ABN Amro, Adyen, L’Oreal, AkzoNobel, GSK, Barrett Developments; Who are ready for the accounts. The data release includes German trade info for December.
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