A Morgan Stanley research note highlights that Aberdeen’s emerging market, Asia Pacific and global funds were hit by “sharp further deterioration” in the fourth quarter of last year and says it is increasingly nervous about the future for the group.
The investment bank’s analysts said they are downgrading Aberdeen to underweight because a deterioration in key fund performance will exacerbate what is already a pressured macro situation in emerging markets and raise the risk of sustained outflow pressure from the core equities franchise. They believe the group’s historical concentration of flows in global emerging markets, Asia Pacific and emerging market debt means the group may be less able than some peers to withstand the continued challenges to emerging market fundamentals and increased uncertainty over the emerging market allocation story and performance.
The analysts did, however, note that Aberdeen’s fund flows remained positive in 2008 and 2011, when other emerging market funds saw strong outflows. They also recognised Aberdeen’s ability, demonstrated by its Asia Pacific funds in 2007, to “snap back” from bouts of underperformance.
The value of emerging market currencies has fallen yet further today, sending equity markets lower and further adding to the pain for emerging market-focused groups such as Aberdeen.