Morning Note: Market news, emerging markets, and Ashmore.
Market News
The 10-year US Treasury yield sits at 4.16%, a four-month low, as investors await the August jobs report, seen as pivotal in cementing expectations for a Federal Reserve rate cut this month. 75k jobs are expected to have been added. Yesterday’s ADP survey showed private payrolls increased by just 54k in August, sharply down from July’s revised 106k and missing forecasts of 65k. Traders are now pricing in nearly 100% odds of a 25-basis point cut on 17 September, with several Fed officials flagging labour market risks as supporting the case for immediate policy easing. Gold trades at $3,550 an ounce, close to its all-time high.
President Donald Trump signed an executive order implementing his trade agreement with Japan. The yen strengthened on a strong wage report.
US equities moved higher last night – S&P 500 (+0.8%); Nasdaq (+1.0%). Amazon was a notable gainer, while Broadcom rose post-market following news it is helping OpenAI design and produce an AI chip to take on Nvidia.
The positive tone continued in Asia this morning: Nikkei 225 (+0.9%); Hang Seng (+1.2%); Shanghai Composite (+1.0%). The FTSE 100 is currently 0.2% higher at 9,222, while Sterling trades at $1.3457 and €1.1525. Ahead of the weekend’s OPEC+ meeting, Brent Crude slipped back to $66.50 a barrel.
Source: Bloomberg
Emerging Markets and Update on Ashmore
The Patronus view on Emerging Markets…
Like their developed market cousins, emerging market equities have performed well in recent months. However, unlike in recent years they have kept pace with and in some cases outperformed. There has been much commentary on the performance of the US mega-cap technology stocks, but it is notable that emerging markets have beaten the US indices year-to-date (YTD). A big contributor to the have been Chinese equities with the Shanghai Composite index +16% YTD. There are also some notable technology shares in the emerging markets. For example, Chinese e-commerce giant Alibaba is +54% YTD.
The more assertive strategy of the US administration towards foreign trade continues to be a risk factor for emerging market equities. However, thus far it has manifested in a weaker US dollar which has counteracted the negative impacts. Overall, we feel that the significant valuation discounts to, in particular, US equities, coupled with the greater growth opportunities over time mean that investors should maintain a meaningful allocation to emerging markets.
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Ashmore Group, the specialist Emerging Markets (EM) asset manager, has released results for the financial year ended 30 June 2025. The figures were below market expectations and in response the shares are down 7% in early trading.
The company believes conditions in EM remains supportive, with the building blocks in place for higher investor allocations. US dominance is being questioned by markets: US dollar trend is lower in value and investors’ portfolios require rebalancing from heavily overweight positions. EM provide superior economic growth, more effective monetary and fiscal policies, and higher risk-adjusted returns. Against this backdrop, the company is seeing rising investor engagement, driven by emerging markets’ superior economic growth and outperformance versus developed markets.
During the year, the group’s assets under management (AuM) fell by 3% to $47.6bn, reflecting in part positive investment performance of $4.1bn, while the level of net outflows improved from $8.5bn to $5.8bn. In addition to existing clients increasing allocations, subscriptions included new mandates in equities and IG fixed income, and capital raising in private equity and private debt funds. Redemptions reduced significantly year on year, albeit they were higher than expected due to a small number of institutional allocation decisions in the third quarter.
EM performed well in the year, with index returns of +8% to +14% across fixed income and equities. Ashmore delivered strong relative performance with an increased proportion of AuM outperforming over one, three and five years at 57%, 70%, and 81%, respectively (vs. only 40%, 59%, and 62% last year).
The company made progress against its strategic objective to diversify the business – there was growth in equities and IG strategies, alternatives AuM increased with new private equity and private debt funds, and new products were launched including frontier blended debt, impact debt, and EM equity ex China.
Adjusted net revenue fell by 22% to £146.5m, with net management fees of £129.7m (-19%). Performance fees contributed £10.2m (-55%) across a range of fixed income and alternatives themes. Continued strong cost management reduced adjusted operating costs by 14% at constant exchange rates. However, adjusted EBITDA fell by 33% to £52.5m, with the margin down five percentage points to 36%.
The group’s balance sheet remains strong – the company has no debt and financial resources of more than £600m, including £350m of cash and deposits. The final dividend has been maintained to give a full-year payout of 16.9p, a yield of 11%.
Looking forward, the company highlights that the global macro environment remains complex, notably with the impact of US policies and geopolitical risks including conflicts. However, several themes are evident and point to the need for investors to rebalance allocations away from the US and to other regions, and particularly to emerging markets, in order to position for higher risk-adjusted returns over the medium term.
Source: Bloomberg
