Asia Pacific Stocks `Very Close' to Trough, Morgan Stanley Says

By Chua Kong Ho

Sept. 11 (Bloomberg) -- Stocks in the Asia Pacific region excluding Japan appear to be ``very close to a trough'' when compared to previous market cycles, according to Morgan Stanley.

The MSCI Asia Pacific excluding Japan Index is trading at 11 times forward price-earnings, just 5 percent above trough levels in prior market downturns, said Morgan Stanley analysts led by Malcolm Wood in a note today. When compared to reported earnings, current valuations are 14 percent below the average trough level of 14.9 times, the note said.

Other signs that point to a market bottom include a slowing decline in U.S. home prices and depressed sentiment in Asia, according to the note.

The MSCI Asia Pacific excluding Japan Index has declined 33 percent this year and is valued at 11.9 times reported earnings, according to data compiled by Bloomberg.

To contact the reporter responsible for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net