Numis raises Ashmore's rating to 'reduce' from 'sell'

Numis has raised its rating on Ashmore Group to ‘reduce’ from ‘sell’, citing long-term prospects and foreign exchange (FX) tailwinds.

The broker also lifted its forecasts for earnings per share in fiscal years 2017, 2018 and 2019 by 8%, 3% and 2% respectively, as it expects the company to benefit from FX movements.

“We continue to think Ashmore is a good company with good long term prospects, but its share price is ahead of fundamentals today, albeit given the FX driven gains in the short term, our negative recommendation moderates from ‘sell’ to ‘reduce’,” said Numis.

Numis noted that Ashmore’s first quarter update reiterated a lag between an improvement in sentiment and flows. The broker also highlighted the company's apparent acceptance at the September analyst meeting that revenue margin declines will likely be an ongoing problem.

“This highlights that even if we did see bigger net flows returning, the net impact on revenue may be smaller than one might think,” Numis said.

Numis reiterated a target price of 315p.

Shares rose 0.05% to 365.70p at 0932 BST.