Monday, 26 September 2016

India among most overvalued Asian markets, says Credit Suisse

Credit Suisse has compared price to book value with return on equities to arrive at the conclusion 

Broking firm Credit Suisse has retained its ‘underweight’ rating on India, terming it as one of the four most expensive markets in Asia. The others are Indonesia, Malaysia and Philippines.

Credit Suisse has compared price to book value with return on equities to arrive at the conclusion.

“Several investors have suggested that using 2017 estimated price earnings growth (PEG) ratios shows India to be the second and Indonesia the third most undervalued market,” says the Credit Suisse note to clients.

“We are not fans of PEG ratios (they remind us of Tech in 2000) as they are usually based on overly optimistic EPS growth forecasts for the year ahead,” the note says.

According to Credit Suisse, the average EPS revision for India over the last four years is negative 10 percentage points.

“If we apply the last four-year average EPS revision for India of -10 percentage points to 2017, then EPS growth is likely to be 8.4 percent,” says the note.

Key equity benchmarks are currently quoting around 17 times one year forward earnings. The forward price earning multiple is usually an indicator of the expected growth in aggregate earnings of the Sensex and Nifty.
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