Ashmore saw its profits jump and inched toward $100bn in assets ahead of the coronavirus outbreak, which has hit Asian equity markets.
The emerging markets specialist enjoyed a comeback over the six months to 31 December 2019, the first half of its reporting period, raking in net inflows of $5.7bn (£4.4bn) and delivering positive investment performance of $900m.
Assets under management surged 7% to $98.4bn (£75.9bn) during the period, up 28% from the previous year. Profit before tax was up 42% on the previous year at $132.4m.
Most of Ashmore’s growth in AUM came from stronger performance in the last three months of the reporting period. Ashmore’s AUM remained stagnant at $92bn between June and September as choppy markets wreaked havoc on its funds which delivered $2.3bn of negative investment performance.
Chief executive Mark Coombs said the group had performed well during the period despite US protectionism, sluggish European growth and improving US economic data, which boosted the dollar, weighing on investor sentiment initially.
Ultra-loose Chinese monetary policy could rattle EM debt
But the emergence of the coronavirus could pose a threat to emerging markets-focused Ashmore in the second half of its financial year.
“The coronavirus outbreak clearly presents the risk of an economic demand shock both for China but also global supply chains,” said Tilney managing director Jason Hollands.
“That could hurt emerging market debt if, for example, the Chinese authorities respond through ultra-aggressively policy loosening which would drive the currency lower.”
Ashmore currently trades on 18x earnings which is a premium to most fund groups, he added.
GEM has been hit hard by coronavirus
Global Emerging Markets funds have been some of the hardest hit following the coronavirus outbreak.
Data from AJ Bell shows that 88 funds in the IA GEM sector are in negative territory from the start of the year to 4 February 2020 compared with 26 who have delivered positive returns.
Artemis Global Emerging Markets and Barclays Global Access Emerging Market Equity are among the top 10 worst performers year-to-date, though the biggest laggards over the period are global energy funds.
Funds hit hardest during coronavirus outbreak
| Fund | IA Sector | Performance from 01/01/20 – 04/02/20 |
| Schroder Global Energy | Global | -11.52% |
| Guinness Global Energy | Global | -10.59% |
| Meridian Global Energy | Global | -6.56% |
| AB Asia Ex Japan Equity Portfolio | Asia Pacific ex-Japan | -6.01% |
| Barclays Global Access Asia Pacific Ex-Japan | Asia Pacific ex-Japan | -5.60% |
| ASI China A Share | China/Greater China | -5.35% |
| New Capital China Equity | China/Greater China | -5.31% |
| Artemis Global Emerging Markets | Global Emerging Markets | -5.29% |
| Barclays Global Access Emerging Market Equity | Global Emerging Markets | -5.22% |
| Waverton Asia Pacific | Asia Pacific ex-Japan | -5.19% |
Source: FE
Hunt for yield could counteract coronavirus hit
But AJ Bell investment director Russ Mould thinks Ashmore might hold up better than expected as investors turn to riskier assets like emerging market debt for yield opportunities.
“Investors remain very hungry for yield and EM is one possible source of the income they crave,” said Mould. “Fixed-income also offers a potential haven, should the outbreak have a deep impact upon the global economy (or even prove to the dreaded black swan event that derails the long-running equity bull market) and January’s booming EM debt issuance figures suggest that appetite for this sort of paper remains undimmed.”
Mould said so far financial markets have been more nonchalant about the viral outbreak than individual companies like Apple, Hyundai and BP which have all warned of a slowdown in sales and supply chain disruptions.
Hope that medical treatments will be developed swiftly and decisive action from the Chinese authorities to shore up liquidity have prevented investors from acting panicky, he said.
