JPMorgan downgrades Ashmore to ‘underweight’

JPMorgan Cazenove downgraded its stance on shares of emerging markets investment manager Ashmore to ‘underweight’ from ‘neutral’ on Tuesday, cutting the price target to 310p from 350p as it said increasing uncertainty poses a risk to net fund flow recovery.

JPM pointed out that Ashmore experienced its first quarter of net outflows in the first quarter of 2020, following 12 quarters of inflows. "Based on Ashmore historical flow trends, cautious outlook on EM debt industry flows and Ashmore fund’s underperformance, we estimate net outflows will continue in the near term," it said.

The bank also said that it’s emerging markets strategy team is more cautious in the near term on the region and that this could have a negative impact on increasing exposure to emerging markets over the coming months.

JPM cut its FY20/FY21 earnings per share estimates by 11% and 6%, respectively, partly reflecting lower flows.

"Ashmore shares trade on CY20E price-to-earnings of circa 16x versus European asset manager sector on circa 13x, and whilst a premium over the long term may be justified we believe given the current weaker flow backdrop such a premium is not warranted," it said.