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Pullback Considered Corrective


Holding Above Recent Lows


BLOCK, Large 3Y Midcurve Put Condor

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  • In this chart, we rank the 11 EM sectors from 'cheapest' to the most 'expensive' ones based on the Price-to-Book, Price-to-Sales and Price-to-Earnings ratio.
  • To compute the score of each EM sectors, we simply add the rank each time; hence, the lowest score a sector can have is 3 (the cheapest) and the highest score is 36 (most expensive).
  • Not surprisingly, real estate appears as the cheapest sector (along with energy) according to our scoring method, as the collapse in China Evergrande stock valuation in recent months has been weighing in the entire sector.
  • Beijing's strict deleveraging demands targeting the housing development sector combined with narrowing options for raising funds have generated a sharp selloff in Chinese developer Evergrande, which price-to-book ratio collapsed from a high of 4.5 in 2017 to 0.40 today.
  • The most expensive sector in the EM market is Health Care (maximum score of 36), with a PE ratio of 45.68 and a price to book of 5.78, followed by Consumer Staples (29) and Telecom (28).

Source: Bloomberg/MNI