Ashmore downgraded by Jefferies to 'hold' amid EM headwinds

Investing.com -- Shares of Ashmore Group (LON:ASHM ) fell over 2% on Wednesday following a downgrade by analysts at Jefferies, who revised their rating to "hold" from "buy." 

This was driven by increasing uncertainties surrounding emerging markets investments, particularly in the context of geopolitical tensions and the evolving trajectory of the U.S. Federal Reserve interest rate policies.

Jefferies analysts flagged that sentiment toward EM assets remains fragile. 

Investors are grappling with a reduced likelihood of significant U.S. rate cuts in 2025, now anticipated at just 65 basis points compared to the 140 basis points projected a few months ago. 

This moderation undermines the attractiveness of EM debt yields relative to the U.S. Treasuries. 

Simultaneously, a stronger dollar continues to act as a headwind for local currency EM debt, further pressuring fund flows.

The brokerage expressed concerns about Ashmore's net new money outlook, projecting substantial outflows in the near term. 

For the second quarter of 2025, they estimate a deterioration of $1.6 billion in net new money, compounded by a negative mark-to-market impact of $2.8 billion. 

These factors could see Ashmore’s assets under management drop to $47.4 billion by year-end 2025, adding to challenges stemming from broader EM market dynamics.

Performance within Ashmore’s SICAV funds, which represent a small portion of its AUM, has also been underwhelming. 

Poor returns in key fund categories such as local currency and blended debt funds may further delay any meaningful recovery in investor flows.

A dividend yield of about10%, as well as excess capital accounting for around 50% of Ashmore's market capitalization, are noted by Jefferies despite the downgrade.

However, these factors were insufficient to maintain a "buy" rating, with the price target revised downward to 170 pence from 220 pence.

The analysts said that a more dovish approach by the Federal Reserve or easing in geopolitical risks could serve as potential catalysts for Ashmore’s recovery. 

Source: Investing.com