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Ashmore Group’s latest quarterly update reveals a significant drop in assets under management. This is seen as a reflection of the ongoing challenges in emerging markets, notably the property market crisis in China.

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A Noteworthy Decline

Ashmore Group’s recent quarterly update revealed a decrease in their assets under management (AuM) by $2.1bn (£1.65bn). This drop included negative investment performance of $0.1bn and net outflows of $2.0bn, a significant departure from the group’s last update in January, which indicated a marked slowdown in net outflows. The outflows were predominantly institutional, notably from local currency, blended debt and corporate debt investment.

The only positive note was a minor inflow into equities, potentially important considering the underperformance of emerging market stock indices compared to the broader stock rebound last year. The total AuM now stands at $51.9bn, a decrease from the £78.3mn at the same time in 2022.

The Impact of Emerging Markets

Sentiment on prospects for emerging markets remains negative, a significant factor in Ashmore’s decline. The Chinese economy, a key player in this sphere, has been slow to recover due to the ongoing property market debt crisis. Despite patchy assistance from Beijing, the crisis continues as evidenced by falling sales, depreciating property prices, and escalating debt costs.

The state-backed property developer China Vanke, which has been integral to China’s property sector growth, recently confirmed that it was faced with short-term liquidity pressure. This was clearly indicated by a slump in prices for its bond issuance.

Analysis

The situation at Ashmore reflects the inherent risks and uncertainties of investing in emerging markets. These economies are more susceptible to macroeconomic shocks and policy missteps, as evidenced by China’s property market crisis.

While some are optimistic about a boost from potential US rate cuts, the persistently sticky inflation may thwart this hope. Ultimately, with the ongoing turbulence in China and the uncertainty surrounding US monetary policy, investing in emerging markets, particularly in the property and debt sectors, should be approached with caution.