Trump’s election campaign was defined by protectionist foreign policy pledges such as building a wall between the US and Mexico and imposing trade tariffs on China. Concerns are now growing that emerging markets, which this year have enjoyed an investing renaissance after several years of poor returns, will suffer again if the world’s largest economy becomes harder to access.
Aberdeen, with $ 402.9 billion in assets, and even more so Ashmore, which manages $ 54.6 billion, are viewed as bellwethers of investor sentiment towards emerging markets, with their trading updates viewed as providing key insight into the broader health of the sector.
An analyst note from Jefferies on November 9 warned: “Any changes to trade agreements as has been mooted by Donald Trump would have a detrimental impact on emerging market GDP growth. This would be particularly concerning for emerging market exposed managers (Ashmore, Aberdeen) and could adversely impact flows.”
Aberdeen and Ashmore declined to comment.
David McCann, an analyst at Numis Securities told Financial News: “There is probably an additional headwind [for emerging market managers] that this morning didn’t exist.” Ashmore is currently negatively-rated by Numis, while Aberdeen’s rating is neutral, but with a negative slant, McCann said.
Mike Clements, head of European equities at Syz Asset Management, who owns shares in both Aberdeen and Ashmore, said: “I can’t fault the logic that Trump is likely to be more protectionist and that adds a headwind. But whether it’s a big impact in the short to medium term is hard to say.
“It’s a question of what Trump wants to do and what he actually achieves. And there are plenty of other things that will influence it.”
Trump’s election sent shudders through emerging markets stocks and currencies, with the Mexican peso hardest hit, down by approaching 10%. South Korea, a major exporter to the US, was also hard-hit, with the currency falling around 2% against the dollar.
Although Aberdeen reported net outflows of £8.9 billion in the three months to June 30, its 13th straight quarter of net outflows, chief executive Martin Gilbert had predicted that inflows were due to return next year. Just under a quarter of Aberdeen’s assets are invested in emerging markets.
In October Ashmore reported that net flows had been flat over the three months ended September 30, the first time in two years it had not reported outflows.
McCann added: “Emerging markets are more reliant on global trade than other economies, if you were to point to one asset class where there is some risk and is probably more at the coal face [it would be emerging markets].”
Emerging markets may get some reprieve as they’re sensitive to rate rises – and the consensus on the morning after the vote was that a US rate rise in December was slightly less likely. However if Trump pursues his agenda of domestic stimulus rate rises are seen as inevitable at some stage.
Neil Woodford, head of investment at Woodford Investment Management wrote in a note: “The election result could, however, puncture the love affair that the market has had this year with emerging market equities and debt. Globalisation will come under the spotlight under a Trump administration and I believe we should expect a greater focus on domestic political priorities at the expense of free trade and globalisation.”
At a Financial News-hosted US election briefing hours after the result was known, Michael Grady, senior economist at Aviva Investors, said: “It is a bunch of those emerging market countries who are most at risk should these protectionist policies actually come through, and therefore their currencies are most at risk.”
Peter Harrison, a strategist for Newton’s Real Return strategy, said: “The integration story of the emerging markets into the world economy is somewhat challenged by this [Trump’s victory].”
As of 2.36pm Ashmore’s share price had fallen 2.1% 2.08% while at 2.37pmAberdeen’s had edged down 0.8%.
Mark Cobley and Samuel Agini contributed to this article.