Ashmore: Emerging markets set for resurgence as interest rate cuts loom
London-listed asset manager Ashmore said emerging markets could be set for a rebound this year after the prospect of interest rate cuts helped boost its investment performance in the final three months of last year.
In a trading update this morning, the FTSE250 investor said its assets under management rose by $2.3bn to $54bn in the three months to December as potential moves by the US Federal Reserve to loosen monetary policy lifted the value of its assets.
Ashmore’s funds notched a positive investment performance of $3.9bn in the three months to the end of December, offset by negative flows of $1.6bn in the same period.
Despite “risk aversion” continuing to grip some of its clients, bosses said they were now expecting a resurgence in appetite in the coming months as inflation cools and central bankers globally begin to weigh up rate cuts.
“Emerging Markets delivered good returns and outperformed most developed world indices in 2023 due to superior economic growth, effective monetary policies and the benefits of a weaker US dollar as the Fed reaches the end of its tightening cycle,” said Mark Coombs, Chief Executive Officer, Ashmore Group.
“These factors, along with attractive absolute and relative valuations, will support emerging markets asset prices in 2024, leading to outperformance and higher allocations from investors who currently have significantly underweight allocations to emerging markets.”
Ashmore’s prediction follows a similar bet from analysts at Lazards last week who said equities in emerging markets are becoming “ever more attractive” and remain “one of the most mispriced asset classes globally”.
However, Ashmore has been among a host of London’s asset managers to feel the squeeze of inflation and tightening interest rates over the past 18 months as skittish investors looked to pull their cash away from the market. Emerging markets, Ashmore’s focus, are seen as a more risky bet by investors.
Shares in the firm have tumbled beyond 15 per cent in the past 12 months amid a slide in value across London’s money runners. Schroders has dipped beyond 11 per cent in value over the past 12 months, while Liontrust has shed nearly half of its value and Jupiter over 48 per cent. Abrdn has fallen over 18 per cent over the past year.
Analysts have warned of “dark clouds” lingering over the sector as it is buffeted by a cocktail of regulatory change and the allure of lower-cost ‘passive’ funds.
“We think the challenges facing the traditional part of the industry look set to remain in place as structural problems,” Numis analyst David McCann wrote.