Breaking News

Tweet TWEET

Australia Stocks Priciest Ever Seen Rallying: Chart of the Day

Close
Open

Australian stocks, which have never cost so much relative to a gauge of Asia-Pacific shares, may get more expensive as an economic recovery broadens, said a global money manager at Equity Trustees Ltd.

The CHART OF THE DAY’s top panel shows Australia’s S&P/ASX 200 Index trades for 15.3 times estimated earnings and the MSCI Asia Pacific Index has a price-earnings ratio of 12.7, based on Bloomberg forecasts for profits. The lower panel shows the spread between the valuation measure for the two gauges sank at the end of April to the narrowest since Bloomberg began compiling the data in 2005.

Investors are paying for earnings growth in the region’s fourth-biggest equity market as record-low interest rates drive a recovery in housing and consumer spending. The S&P/ASX 200 reached the highest level in almost six years last month.

“We’ve got more stable global conditions and low interest rates, suggesting some premium for future earnings is warranted,” said George Boubouras, Melbourne-based chief investment officer at Equity Trustees, which oversees $32 billion for clients. Valuations “are expected to expand in the year ahead.”

Benchmark stock gauges in Japan, Hong Kong and China fell in 2014, dragging valuations lower for Australia’s larger regional peers. Australia’s S&P/ASX 200 hasn’t diverged from the MSCI World Index, a global developed-market measure that counts nine U.S. companies among its 10 most-heavily-weighted firms.

Photographer: Sergio Dionisio/Bloomberg

A pedestrian waits to cross the road outside the Australian Securities Exchange (ASX Ltd.) headquarters in Sydney. Close

A pedestrian waits to cross the road outside the Australian Securities Exchange (ASX... Read More

Close
Open
Photographer: Sergio Dionisio/Bloomberg

A pedestrian waits to cross the road outside the Australian Securities Exchange (ASX Ltd.) headquarters in Sydney.

Australian gross domestic product growth will quicken to 2.8 percent this year from 2.4 percent in 2013, while Asia’s expansion will slow to 6.2 percent from 6.3 percent, according to the median forecasts of economists surveyed by Bloomberg.

To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net

To contact the editors responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net John McCluskey

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.