Asia Pacific Equity Strategy:With MSCI Asia ex-Japan hitting our 640yearend target,here are some blue sky scenarios
First blue sky scenario assumes next year’s EPS growth is alsopriced in…Having written about trough valuations over the last few years(see our report of 8 Jan 2016 How far from trough valuations?), we mustadmit we are rather nervous about writing on potential blue sky scenarios.
娱乐在线 ，澳门新葡亰平台游戏怎么样 ， The three blue sky scenarios suggest potential upside ranging from 6% to15%. In our first blue sky scenario, which assumes 2017-18E consensusEPS growth is fully priced in, we get 6% to 8% upside (see Figure 1). Onthis metric, Korea continues to offer the largest potential upside of 20%.
The second blue sky scenario assumes further consensus EPSupgrades. July, so far, is associated with a further 0.9% upgrade to 2017Econsensus EPS (Korea +4.3% in July). This is now the 13th consecutivemonth of upgrades to 2017E consensus EPS. If we assume upgradescontinue and we track MXASJ’s performance in 2004, there appears to bea further 14% potential upside.
The third blue sky scenario assumes P/B trades 10% above its longtermhistorical average. While the last five years have been associatedwith slowing ROEs and a derating of P/B, our third blue sky scenarioassumes a re-rating of P/B to 10% above its historical average as ROErises towards its longer-term historical average which suggests 15% upsidepotential.