By Gaurav Dogra

(Reuters). Asian shares had their relative valuations fall to 18 year lows after they fell to 2021, as investors feared slower growth in the face of COVID-19-induced curbs. According to data from Refinitiv, the forward 12-month MSCI Asia-Pacific index P/E ratio was 14.27, while the MSCI World P/E rate stood at 18.31 at last week’s end. The data revealed that the valuation discount at over 22% was the largest since June 2003.

Graphic: MSCI Asia-Pacific and World index’s PE, https://fingfx.thomsonreuters.com/gfx/mkt/jnpwejwqepw/MSCI%20Asia-Pacific%20and%20World%20index’s%20PE.jpg Shares in Hong Kong, China and South Korea were the cheapest in the region, with each market having a forward 12-month P/E ratio of less than 11.

Graphic: Valuations of Asia-Pacific equities, https://fingfx.thomsonreuters.com/gfx/mkt/byprjmrzkpe/Valuation%20of%20Asia-Pacific%20equities.jpg The MSCI Asia-Pacific index shed 3.4% in 2021, compared with the MSCI United States’ gain of 25.24% and MSCI Europe’s 13.75% last year. Toby Hudson, asset manager, stated that some sectors of Asia’s stock markets look very cheap on their headline multiples. He was referring to banks, insurance and property as the areas where they are most vulnerable. Schroders (LON:).

“These sectors tend to be beneficiaries of higher inflation or interest rates so there might be opportunities for an improvement on returns in the long term, if inflation is not just a transitory’ issue,” said he.

However, the growth of fintech in the region and ecommerce means that these industries are facing ongoing structural problems, which limit our optimism. Refintiv data shows that analysts cut 2022 earnings of the MSCI Asia Pacific Index for the fifth month consecutively in December.

Graphic: Breakdown by country for estimates changes in last 30 days, https://fingfx.thomsonreuters.com/gfx/mkt/zdpxoqrmmvx/Breakdown%20by%20country%20for%20estimates%20changes%20in%20last%2030%20days.jpg Real estate and consumer sector firms were among those facing the biggest earnings cut in 2022 over the past month, the data showed.

Graphic: Breakdown by sector for estimates changes in last 30 days, https://fingfx.thomsonreuters.com/gfx/mkt/gdpzykwzrvw/Breakdown%20by%20sector%20for%20estimates%20changes%20in%20last%2030%20days.jpg “Although there is a catch up expected for Asian companies profit growth, COVID-19 related issues are bound to drag Asia’s growth,” said Alicia Garcia Herrero, chief Asia Pacific economist at investment manager Natixis. Graphic: Asian companies’ estimated profit growth in 2022, https://fingfx.thomsonreuters.com/gfx/mkt/myvmnbgkdpr/Asian%20companies’%20estimated%20profit%20growth%20in%202022.jpg