Valuation gap favors Southeast Asian equities
The guest argues that the historic valuation discrepancy between expensive US equities and cheap Southeast Asian value stocks favors the latter for long-term allocators.
The argument
The valuation spread is illustrated by comparing Thailand's TOA Paint at 8x PE to US peer Sherwin-Williams at 28x PE. While developed markets offer superior corporate governance, emerging markets historically outperform when starting from such depressed valuation levels.
The thesis, stress-tested
✓ What validates it
- ✓Reversal of global capital flows back into emerging markets
- ✓Earnings resilience in Southeast Asian consumer and infrastructure sectors despite macro headwinds
▸ Risks discussed
- ▸Weaker corporate governance standards in emerging markets compared to the US
- ▸Prolonged period of US market outperformance delaying the valuation mean-reversion
Hear it yourself
"and Samsung Electronics, we're now talking 200,000,000,000 US dollars in net profit estimates for 2028. 200,000,000,000 and 250,000,000,000, that will make them the most profitable companies in the world. And these are companies that produce commodities. So I wouldn't say that the memory chip cycle is over. I in fact, I'm not able to to confidently predict how the cycle is going to move, but I'm also very, very confident that these Chinese competitors that have been trying to improve their yields, they are now very profitable, and they will come with new supply in 2027 onwards."
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