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China Is Now Cheapest Equity Market Among EM (P/B Z-Score Approach)

CHINA
  • China equities are now the ‘cheapest’ EM equity markets (excluding Russia from ranking as P/B value is 0) as zero-Covid policy continues to weigh on the real economy and domestic risky assets.
  • Easing signals from China officials combined with the rebound in 'liquidity' (TSF 12M Sum) in recent months have not been enough to stimulate risky assets, which continue to trade at low levels relative to historical standards.
  • Momentum on the Hang Seng Index has been bearish since the start of the month, with the index erasing nearly 40% of its March gains (following the headline that regulatory authorities are ‘mulling measures to jointly crackdown on malicious short sellers).
  • In this chart, we compute the z-score of P/B ratios of the 16 EM equity markets (15 countries + MSCI Emerging Market index) using over 10 years of data (starting January 2010) and then rank them from 'cheapest' to 'most expensive' based on the distance between the minimum value and the current z-score.
  • At the top, India remains the 'most expensive' market among the EM world, with a current price-to-book ratio of 4.03 (vs. 1.72 for EM MSCI index).

Source: Bloomberg/MNI

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  • China equities are now the ‘cheapest’ EM equity markets (excluding Russia from ranking as P/B value is 0) as zero-Covid policy continues to weigh on the real economy and domestic risky assets.
  • Easing signals from China officials combined with the rebound in 'liquidity' (TSF 12M Sum) in recent months have not been enough to stimulate risky assets, which continue to trade at low levels relative to historical standards.
  • Momentum on the Hang Seng Index has been bearish since the start of the month, with the index erasing nearly 40% of its March gains (following the headline that regulatory authorities are ‘mulling measures to jointly crackdown on malicious short sellers).
  • In this chart, we compute the z-score of P/B ratios of the 16 EM equity markets (15 countries + MSCI Emerging Market index) using over 10 years of data (starting January 2010) and then rank them from 'cheapest' to 'most expensive' based on the distance between the minimum value and the current z-score.
  • At the top, India remains the 'most expensive' market among the EM world, with a current price-to-book ratio of 4.03 (vs. 1.72 for EM MSCI index).

Source: Bloomberg/MNI