Ashmore slumps as Barclays reiterates 'underweight', slashes price target

Ashmore tumbled on Monday after Barclays reiterated its ‘underweight’ rating on the investment manager and cut its price target to 270p from 325p.

The bank noted that despite a 19% selloff in the final quarter of last year, the company still outperformed its asset manager peers and was up 11% over the year. In addition, it said the stock’s valuation is still the most expensive in the sector at 18x calendar 2017 price-to-earnings versus a sector average of 13x.

"We remain cautious on emerging markets-exposed names, given rising US yields and deteriorating EM sentiment after the US elections. There is evidence in weekly data that the unwinding of the EMDM 'carry trade' is already causing EM inflows to reverse,” the bank said.

Barclays pointed out that historically, post-2008, Ashmore has suffered outflows during periods of speculation around a hawkish Fed/rising US Treasury rates, not just around the 2013 “taper tantrum”.

The bank said that a continued decline in volatility in US rates appears a necessary condition for EM flows to stabilise further, which seems unlikely in the near term given macro-policy uncertainty, underpinning its low conviction around a strong rebound in flows.

Barclays has become more bearish on its flows and market movement assumptions, causing its assets under management estimates for full-year June 2017 and June 2018 to fall by 8-9%.

At 0850 GMT, Ashmore shares were down 6.4% to 280.10p.