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Ashmore hopes to gain from a less hawkish Fed

First-half net inflows for the EM specialist were lower than the prior year due to a stronger US dollar
February 14, 2019

Slowing US economic growth and a less aggressive tone from the Federal Reserve could engineer a change in fortunes for emerging markets (EM) this year, says Ashmore (ASHM) chief financial officer Tom Shippey. More bullish sentiment towards developed markets and the ongoing US/China trade spat detracted from emerging markets during the latter half of 2018, and while the EM specialist may have gained $2.4bn (£1.88bn) in net inflows, that was below the $7.9bn attracted during the first half of FY2018.

IC TIP: Hold at 387p

Together with just $100m in performance gains, that nudged assets under management up by 4 per cent during the six-month period, or 10 per cent annually. Lower performance fees and the loss of almost £10m from the marking-to-market of the asset manager’s seed capital investments meant pre-tax profits were slightly below market consensus expectations. However, after stripping out the latter, adjusted operating profits were 9 per cent higher at £96.2m.  

Corporate debt led the way in terms of attracting inflows, gaining a net $900m, with management pointing to an improvement in the high-yield default rate and falling corporate leverage. Despite the relative strength of the US dollar, local currency debt also attracted $400m in net inflows. Equity strategies – an area Ashmore is seeking to increasingly diversify into – managed $100m in net inflows despite macroeconomic tumult in markets including Argentina and Turkey. The MSCI Emerging Market Index declined by almost 10 per cent during the period, reflected in $200m in performance losses for Ashmore’s equity strategy. 

Chief executive Mark Coombes also announced plans to sell-down part of his 39 per cent holding in the group, at 4 per cent annually over the medium-term, to reduce his stake to a “more appropriate level”.

Analysts at Numis expect adjusted pre-tax profits of £206m for the year to June 2019, giving EPS of 23.1p (from £191m and 21.3p in 2018).

ASHMORE (ASHM)   
ORD PRICE:387.4pMARKET VALUE:£2.76bn
TOUCH:387-2-388.2p12-MONTH HIGH:431pLOW: 335p
DIVIDEND YIELD:4.3%PE RATIO:18
NET ASSET VALUE: 108pNET CASH:£425m
Half-year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20171349912.04.55
20181529310.84.55
% change+13-6-10-
Ex-div:7 Mar   
Payment:4 Apr