ii view: Ashmore gains on robust emerging markets

First-quarter trading update to 30 September

• Total Assets under Management up 5% from the previous quarter to $51.8 billion (£39.9 billion)

Chief executive Mark Coombs said:

"Emerging Markets performed well over the quarter, reflecting robust macroeconomic conditions in emerging countries, the positive impact of lower Fed rates weakening the US dollar, and targeted stimulus by the Chinese authorities. Consequently, investor appetite has been increasing and allocations to Emerging Markets should grow from the low current levels to capture the value available across equity and fixed income asset classes.

"Ashmore's active investment approach continues to deliver outperformance for clients, and the Group is well-positioned to benefit as client flows to Emerging Markets gather momentum."

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ii round-up:

Specialist fund manager Ashmore Group (LSE:ASHM) today detailed first-quarter trading that exceeded City estimates as investors appeared to take a more optimistic view regarding emerging markets. 

Fund withdrawals of $0.7 billion beat analyst estimates for net outflows of $1.2 billion, with positive emerging market investment performance of $3.2 billion pushing overall Assets Under Management up 5% from late June to $51.8 billion (£39.9 billion). Outflows of $0.7 billion are Ashmore’s best quarterly performance in more than three years.  

Shares in the FTSE 250 company rose 7% in UK trading having come into this latest news down by around 13% year-to-date. That’s similar to generalist fund manager Schroders (LSE:SDR), although in contrast to a 6% gain for the FTSE 250 index in 2024.  

Ashmore invests in asset classes including government and corporate debt, equities, and real estate across emerging markets on behalf of institutional and retail clients. Hopes for continued US interest rate cuts likely underpin increased investor optimism. 

Emerging markets proved strong over the three-month trading period to late September, with fixed income indices gaining between 4% and 9% and equities rising 8%. 

Net outflows during the quarter were primarily in local currency related debt, offsetting net inflows into external debt and equity products.

A second-quarter trading update is scheduled for 15 January. 

ii view:

Founded in 1992 as part of the Australia and New Zealand Banking Group, Ashmore became independent in 1999, then listing on the London Stock market in 2006. Largely focused on emerging market debt or bonds, Ashmore manages across the six investment strategies of external currency priced debt, local currency priced debt, corporate debt, blended debt products, equities and alternative assets. 

For investors, inflation could prove stickier than anticipated, pressuring central banks to leave or at least slow the pace of interest rate cuts. Geopolitics and a widening of the war in the Middle East could push the price of key inflation component oil higher. Competition generally across the asset management industry remain intense, while a forecast price/earnings (PE) ratio above the three- and 10-year averages may suggest the shares are not obviously cheap.

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To the upside, Ashmore’s specialist focus on the emerging markets helps set it apart from the pack. Consolidation across the asset management industry remains a future possibility. Emerging market economies should continue to grow faster than their developed counterparts, while hopes for further US interest rate cuts persist. 

For now, and despite ongoing risks, a forecast dividend yield of over 8% is likely to keep income investors interested.  

Positives: 

• Net cash held of over £500 million as of 30 June
• Attractive dividend (not guaranteed) 

Negatives:

• Uncertain economic outlook
• Fee pressure from ETF funds

The average rating of stock market analysts:

Hold