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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: Les H who wrote (78797)6/4/2007 9:44:48 AM
From: Les HRead Replies (1) of 306849
 
The recent rise in long-term interest rates around the world - largely ignored by investors - is a bigger threat to Asian equity markets than any potential crash in China, and could trigger widespread corrections given stretched valuations in Asia, HSBC has warned.

"Investors fixated on the bubble in the Chinese stock market over the past few weeks have missed, to our minds, a much more important risk to global equities: the steady rise everywhere in long-term interest rates," strategist Garry Evans wrote in a report Friday.

Hong Kong yields have risen to 4.6 percent, from 4.2 percent, over the past three months, and three-month interbank rates have also jumped to 4.7 percent from 4.2 percent.

These jumps are even more marked than the rise in 10-year US Treasury yields, Evans said.

These risks matter because valuations in Asia are becoming increasingly stretched. The forward price-earnings ratio for Asia excluding Japan has reached 14.3 times, or 1.5 standard deviations above the post-2001 average.

US Treasury yields have risen 37 basis points in the past three months, reducing the fair value of Asian equities by 7 percent. "What this means is that the market is likely to be vulnerable to any small downside surprises," HSBC said.

thestandard.com.hk
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