LONDON - Ashmore’s resilience is a buy signal for emerging markets. The fund manager, which focuses on riskier geographies, is growing revenue. Also, its managers are taking more risks as a rout caused by rising trade tensions and turmoil in Turkey throws up opportunities. That suggests developing markets can avoid a synchronised slump.

A selloff in emerging market that accelerated in recent months wasn’t much in evidence in Ashmore’s full-year results on Friday. Revenue rose 11 percent in the year to end-June, to 278 million pounds, while net inflows into its funds were the largest on record. Market conditions have since worsened but the group views that as an opportunity, rather than a threat.

It’s a bold stance given Turkey and Argentina are in crisis and U.S. President Donald Trump is slapping tariffs on some imports into his country. Meanwhile, tighter U.S. monetary policy is spurring investors to dump bonds denominated in local currencies. Funds focused on such debt lost 4 percent of their assets in the last quarter alone, according to ING research, while a BlackRock exchange-traded fund that tracks local currency bonds has fallen nearly 14 percent year to date.

Ashmore says emerging markets are a broad asset class but that the good are being punished alongside the bad. Such discrimination has paid off in the past. Some 94 percent of Ashmore’s funds outperformed their benchmarks over the last three years even though there was a similar panic after Trump was elected in 2016.

There are other signs that some asset prices may have fallen too far. Much of the selling over the last quarter has been dominated by retail investors, according to ING. There are other oddities. Bonds issued by Zambia have fallen to similar levels to those of Mozambique, which defaulted last year. And Turkish dollar-denominated bonds maturing in just over a year yielded nearly 10 percent earlier this week even though the country’s debt is less than 30 percent of GDP.

True, things could get worse if there were, for example, an all-out trade war. But Ashmore’s shares are now valued at more than 14 times forward earnings, a premium to peers and only a little below its 10-year average. That multiple fell as low as 11 times during the 2013 taper tantrum. The rich valuation implies that emerging markets are experiencing a drama, not a crisis.

CONTEXT NEWS

- Ashmore, a specialist emerging markets investment manager, said on Sept. 7 that revenue rose to 278 million pounds in the year ending June 2018, up 11 percent from a year earlier.

- The group attracted $16.9 billion of net inflows in the year, lifting its assets under management to $73.9 billion at the end of June. Some 73 percent of its funds outperformed their benchmarks over one year, and 94 percent over three years.

- Ashmore’s average management fee margin fell to 49 basis points from 52 basis points.

- Ashmore Chief Executive Mark Coombs said that the current “mispricing” was a “very appealing entry point for investors”.

- Ashmore shares rose around 2 percent to 351 pence as of 0900 GMT on Sept. 7.

(Editing by Swaha Pattanaik and Karen Kwok)

© Reuters News 2018