Average valuations rise in Asia

Public market valuations in Asia have increased since 2012, led by a jump in the average P/E of Indonesian companies. China is the exception.

Public market valuations in Asia have generally increased during the period of January to July compared to full year 2012, with the average price-to-earnings up across most key stock market indicies, according to data from Thomson Reuters.

In Asia, public and private market valuations tend to be correlated, says John Parker, partner at KPMG China. “Typically public markets are a good starting point for private valuations.”

Indonesia has the highest listed company valuations in Southeast Asia, with the average price-to-earnings ratio of 17.48 for the period January to July 2013, according to the data.

Average P/E ratios

   2013
Jan-July*
 2012
 Indonesia   17.48   12.74
 Australia  16.75  13.29
 India  15.83  14.95
 Singapore  12.26   9.44
 Vietnam  11.98   9.79
 Hong Kong  11.05   9.97
 China  10.77  11.48
 Korea  10.04   9.49

*January 1-July 22, 2013
Source: Thomson Reuters

The figure is up significantly from 12.74, Indonesia’s average P/E for the full year 2012.

“Private valuations in Indonesia are starting to trend higher than investors might be looking for,” says Parker. “The correlation between buyers and sellers is getting farther apart.”

China was the only market in Asia where the average price-to-earnings fell. China's figure was 10.77, down from the full year 2012 average P/E of 11.48. 

Late last year, regulators froze the IPO process in China to review applications and reform the listing process. IPOs did not resume in April as expected and there has been no official announcement about when the listing process will be restarted. 

Regulators were hoping that a freeze on IPOs would bolster the share prices within the market as investors focus on what’s already listed, Parker said, but that hasn't happened. Many investors have instead turned to other opportunities such as real estate.

Price -to-earnings will continue to slide as China’s public listings remain on hold.

“In certain cases [a prolonged freeze] is likely going to result in a desperation for capital,” Parker says. “It could cause certain businesses to look to private equity for bridge financing or they may seek a listing on the Hong Kong stock market.”