Ashmore rallies on Goldman Sachs upgrade

Asset manager Ashmore got a boost on Friday as Goldman Sachs upgraded its stance on the stock to ‘buy’ from ‘neutral’ and raised the price target to 420p from 310p.

The bank cited four main reasons for the upgrade: improving industry flow trends, strong fund performance, lower exposure to UK investors and positive FX tailwind.

It said investor demand for emerging market debt has strengthened this year, with last week’s flow into Hard Currency Debt the largest since March 2015.

“Our economists also see potential for EM countries to lower interest rates from current levels, suggesting the supportive macroeconomic backdrop may continue for some time.”

It pointed out that Ashmore’s hard currency and local currency strategies have reported strong performances relative to peers over three and five years. “We believe this will help the group to benefit from the acceleration of flows into EM debt funds that we expect.”

GS also noted that less than 10% of Ashmore’s assets under management are sourced from UK investors, which it reckons will insulate the group from the slowdown in UK fundraising it expects in the near term. It said two-thirds of assets are sourced from Asia, the US or Middle East.

Finally, it said around 60% of Ashmore’s AUM is held in assets denominated in US dollars.

“With much of the group’s costs denominated in GBP, we expect the recent depreciation in sterling to drive a strong translational P&L benefit for the group. In addition, given the depreciation, we expect Ashmore to report material one-off gains on its balance sheet cash and seed capital holdings.”

At 1040 BST Ashmore shares were up 3.9% to 340.90p.