Ashmore trading results upbeat on emerging markets

Ashmore's London offices

Outflows declined and assets rose for the second quarter in a row at the emerging markets specialist

Ashmore’s assets rose 3% to $ 52.6 billion in the three months to June 30 as investment returns of $ 2 billion outweighed net outflows of $ 0.7 billion, according to the firm’s fiscal fourth-quarter trading update published on July 14.

While it was the eighth consecutive quarter where investors took out more money than they put in, the pace of outflows continued to slow compared with the $ 1.7 billion and $ 1.1 billion in the previous two quarters.

Analysts at research firm Liberum said the firm was “close to an inflexion point”, predicting net inflows of $ 3 billion in 2017 and $ 6.4 billion in 2018.

The firm said that emerging markets fundamentals had “reasserted” themselves while “previous headwinds, such as falling commodity prices and a strong US dollar against emerging markets currencies, abated”.

Market sentiment towards emerging markets appears to be warming after a sustained period of poor performance and outflows, during which time Ashmore has also suffered. On June 30, 2014, Ashmore’s assets stood at $ 75 billion, while its share price is down 9.7% over the same period.

However, for the year to date its share price is up 26.8% to 324.8p as of 9.35 BST on July 14. Since September 2015, hedge funds have also been gradually reducing their short positions in the firm.

Short positions – which enable investors to profit from falling share prices – stood at 8.1% on July 13, according to Markit. They had hit a record high of 13% on September 22, 2015.

In Ashmore’s trading update, chief executive Mark Coombs said: “[Emerging market] asset classes are among the best performing so far in 2016, for example local currency bonds have returned 14% and yield over 6%.

“The highly attractive yields and uncorrelated equity returns are supported by solid fundamentals such as higher GDP growth, low and stable inflation, flexible monetary policies and improving current accounts. In contrast, developed markets offer lower returns and appear to have mispriced economic and political risks.”

On July 12, BlackRock’s Investment Institute said it was “warming up” to emerging market assets, as a result of structural reforms in some countries and investors looking to get away from negative rates.

Ashmore reported inflows across external debt, local currency and corporate debt of 6%, 2% and 9% respectively, while assets in other classes remained stable.

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