HSBC Asset Management reports that US equities have reached new highs while maintaining their price-earnings (PE) ratio premium, a trend underpinned by robust profit growth expectations of approximately 15% for 2026 [1]. This strong profit outlook has kept US valuation metrics stable despite the market's ascent [1].
In contrast, several other global markets have experienced notable re-ratings, with PE discounts shrinking or turning into premiums. Taiwan is highlighted as the most 'expensive' market relative to its historical averages, now trading at a PE premium of over 20%. This is attributed to Taiwan's central role in the AI hardware supply chain [1]. South Korea, also benefiting from AI sector enthusiasm, continues to trade at a discount despite strong price momentum, as its expected profit growth is projected at 100% [1].
Brazil, a major oil exporter, has seen a significant shift in investor sentiment. The country's market moved from a 30% PE discount last year to a 7% premium, reflecting increased investor appetite for emerging market risk [1]. HSBC notes that as global PE discounts shrink, investors will need to work harder to identify value opportunities across markets [1].
CONCLUSION
HSBC's analysis underscores a divergence between profits and valuations across global equity markets, with the US supported by strong profit growth and other regions experiencing re-ratings due to sector-specific drivers and shifting investor sentiment. As valuation gaps narrow, investors may face greater challenges in finding attractive value opportunities.