Aberdeen's emerging market recovery likely to stall, Merrill warns

Although this week's results were better than expected, Bank of America Merrill Lynch downgraded Aberdeen Asset Management to a 'neutral' rating as it thinks the flow of investor money into the company's emerging markets sweetspot is likely to stall.

Aberdeen had highlighted an improvement in EM flows in recent months.

However, given renewed EM macro uncertainty in of late, Merrill said data was already showing that investors were becoming more cautious about EM equities and likely to stay on the sidelines for longer.

As Aberdeen has not benefitted from large EM inflows this year, the bank saw less risk for assets to be quickly unwound.

But Aberdeen was also forecast to see a 4% rise in costs from higher expenses due to the weak pound and other factors.

Analysts cut their 2017-18 earnings per share estimates by 6-8% on slower flow recovery and worse market performance, saying the cost increase could be offset by savings.

The price target was cut to 295p from 355p previously.