Ashmore rides rising stock markets

The general greening up of share indices around the world over the past three months has lifted emerging market specialist Ashmore (ASHM) from its long slump – at least as far as its share price is concerned. On the other hand, investor appetite for higher-risk emerging market debt and equities has not quite returned to pre-pandemic levels as the market waits on the immediate impact of China’s reopening before placing a definitive stake. This was reflected in the 11 per cent attrition in Ashmore’s assets under management (AUM), which stood at $57.2bn (£47.6bn) at the end of the half.

Around $7.6bn of this was due to outflows, which was slightly offset by $800mn of improved investment performance as key assets started to show price rises. A key factor now for Ashmore is that the dollar’s strength, which caused investors to dump emerging market assets in favour of the greenback, has started to moderate. This provides an incentive for investors to seek out other assets, and lessens the pain for countries that have borrowings denominated in the currency.

The volatility seen in 2022 influenced different some asset classes more than others. For instance, corporate bond fund redemptions stayed low, with more subscription and redemption activity on the equities side of the business.

Numis analysts pointed out that Ashmore’s investment performance is still 8 per cent below the benchmark for the year and that this would continue to have an impact on client retention and sales. This means the manager might not pick up its fair share of fund flows as sentiment improves. But we think that momentum will do the heavy lifting for Ashmore’s shares, geared as they are to market recovery. The forward price to earnings ratio of 18 is priced for this scenario. Buy.

Last IC view: Buy, 204p, 8 Sep 2022