Asian equities valuations jumped to the highest since January at the end of April, following a sharp recovery in regional shares last month due to the stimulus measures unveiled by governments to mitigate the damage caused by the coronavirus pandemic.
MSCI's broadest index of Asia-Pacific shares gained 8.13% in April, recording its best month in more than four years. The surge drove the index's 12-month forward price-to-earnings (P/E) ratio to 13.46 at end-April, compared with 11.79 a month earlier.
Asian equities reflect excessive optimism about corporate performance, ANZ Bank said in a report, warning that the first-quarter corporate results might reflect the full scale of the growth shock that would lead to renewed downward pressure on regional equities.
So far, Asia's large- and mid-cap firms have posted a 17% fall in first-quarter net profits, data from Refinitiv Eikon showed.
China, Vietnam and South Korea shares were the cheapest in the region, with P/E ratios of 9.6, 10.4 and 10.6, respectively.
New Zealand was the most expensive with a P/E ratio of 28.3, followed by Thailand and India.
Despite the sharp recovery last month, Asian shares lagged their global peers in terms of valuations. MSCI's World Index gained about 10.6% last month and its P/E ratio jumped to a 16-year high of 16.62.