Equities: Profits and valuations diverge – HSBC

HSBC Asset Management notes that US equities are at new highs while maintaining their price-earnings premium, supported by robust profit growth expectations around 15% for 2026. Other regions such as Taiwan, South Korea and Brazil have seen notable re-ratings, with global PE discounts shrinking and investors needing to work harder to find value opportunities across markets.

US profits and EM re-ratings in focus

"The US stock market is back at new highs but still trades at the same price-earnings (PE) ratio premium. Many other global markets have seen re-ratings. Why?"

"The answer lies in profits. US profits growth is pencilled in at around 15% in 2026, which has kept the valuation arithmetic in check."

"Meanwhile, other regions have seen PE discounts turn into PE premiums. Taiwan stands out as the most “expensive” market relative to its history, sporting a premium to its average PE of over 20%. That’s down to its central role in the AI hardware supply chain."

"South Korea also benefits from AI excitement, but despite strong price momentum, expected profit growth of 100% keeps the market trading at a discount."

"Also noteworthy is Brazil, a major oil exporter, where last year’s 30% PE discount is now a 7% premium. That partly reflects a pick-up in investor sentiment towards emerging market risk."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)