- US monetary policy tighter for longer
- More gloom on China's property sector
It’s not difficult to identify the most newsworthy detail of Ashmore’s (ASHM) latest quarterly update: assets under management (AuM) are down by $2.1bn (£1.65bn), comprising negative investment performance of $0.1bn and net outflows of $2.0bn. The revelation was somewhat at odds with the group's last update in January which pointed to “a marked slowdown in the net outflows”. The outflows were largely institutional, with “money being pulled mostly from local currency, blended debt and corporate debt investment”. Only the modest inflow into equities provided a glimmer of hope, perhaps significant in that emerging market stock indices underperformed the wider rebound in stocks last year.
Total AuM stood at $51.9bn. At the same stage in 2022 the comparable figure was $78.3bn but was already in decline. Sentiment on prospects for emerging markets remains negative despite the slight boost for equity inflows. The restoking of the Chinese economy has moved at a snail’s pace, a partial reflection of the ongoing debt crisis in its property market. Assistance from Beijing has been patchy at best, perhaps a tacit admission that state intervention has its limits in a sector crippled by plummeting sales, falling prices and rising debt costs – an imperfect storm, as it were. To make matters worse, the state-backed property developer China Vanke (CN:000002), a company synonymous with the growth of China’s property sector, recently admitted that it was facing short-term liquidity pressure, as evidenced by the slump in prices for its bond issuance.
None of this is positive for Asia’s growth engine and, by extension, prospects for Ashmore. Group chief executive Mark Coombs said that with the “US dollar at or close to its cyclical peak”, an easing of monetary policy “will underpin returns from local currency bonds and equities”. It’s hard to argue with that assessment, but it assumes that rate cuts are in the offing, but inflation across the Atlantic is proving to be stickier than anticipated.
