Valuations remain a concern when we look at equity indices. Nearly all markets are above their 90th historical percentile when considering their price-to-earnings ratio on a next-twelve-months (NTM) basis. By this metric, Chinese equities (HSCEI and HSI) appear the most attractive but are acutely exposed to a deterioration in US-China relations. However, it is important to keep in mind that these historically high valuations are not necessarily irrational: low rates across bond maturities, a massive amount of asset purchases from central banks, and a global economic recovery have naturally fed equity buying.
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