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Aberdeen Asset Management shares hit by emerging market fears Aberdeen Asset Management shares hit by emerging market fears
(35 minutes later)
Aberdeen Asset Management, one of the UK’s biggest investment companies, said emerging markets are continuing to cause it trouble as investor appetite is curbed by expectations of higher interest rates in the US. Aberdeen Asset Management, one of the UK’s biggest investment companies, said emerging markets are continuing to cause it trouble as expectations of higher interest rates in the US curbs investor appetite.
The firm took a further hit as institutional investors pulled out of Asia and emerging markets. Net fund outflows increased to almost £10bn in the quarter to June, from £6.5bn the previous three months, and marking the ninth quarter of outflows from emerging markets. Total assets under management fell 7% to £307.3bn.The firm took a further hit as institutional investors pulled out of Asia and emerging markets. Net fund outflows increased to almost £10bn in the quarter to June, from £6.5bn the previous three months, and marking the ninth quarter of outflows from emerging markets. Total assets under management fell 7% to £307.3bn.
Chief executive Martin Gilbert vowed to maintain Aberdeen’s emerging markets focus, even though he admitted: “It’s painful watching those outflows. Our style of investing is out of fashion. Hopefully people will love emerging markets again at some stage.”Chief executive Martin Gilbert vowed to maintain Aberdeen’s emerging markets focus, even though he admitted: “It’s painful watching those outflows. Our style of investing is out of fashion. Hopefully people will love emerging markets again at some stage.”
The news pushed the shares down by more than 6% to levels last seen in March 2014 (373.1p), making them the worst performer on the FTSE 100 index.The news pushed the shares down by more than 6% to levels last seen in March 2014 (373.1p), making them the worst performer on the FTSE 100 index.
Expectations of a Federal Reserve rate hike in coming months are putting people off investing in high-yielding, but risky emerging market assets, alongside China’s economic slowdown and stock market collapse and falling commodity prices.Expectations of a Federal Reserve rate hike in coming months are putting people off investing in high-yielding, but risky emerging market assets, alongside China’s economic slowdown and stock market collapse and falling commodity prices.
The prospect of higher US rates and the ensuing rise in the dollar have sparked fears of renewed volatility in emerging economies’ currency, bond and and stock markets. The Fed’s message in 2013 that the end of quantitative easing was nigh sent shockwaves through many emerging markets, but international economist Nouriel Roubini says the risk of outright crises is more limited this time. The 2013 “taper tantrum” caught markets by surprise, but the Fed, chaired by Janet Yellen, has long signalled that rates will go up, and that they will rise only gradually. The prospect of higher US rates and the ensuing rise in the dollar have prompted fears of renewed volatility in emerging economies’ currency, bond and and stock markets. The Fed’s message in 2013 that the end of quantitative easing was nigh sent shockwaves through many emerging markets, but international economist Nouriel Roubini says the risk of outright crises is more limited this time. The 2013 “taper tantrum” caught markets by surprise, but the Fed, chaired by Janet Yellen, has long signalled that rates will go up, but that they will rise only gradually.
Gilbert said sentiment could turn “late this year or even next year”. He argued: “The long term investment case for Asia and emerging markets is unchanged and we believe that committed investors will be rewarded over time.” Gilbert said sentiment could turn “late this year or even next year”. He argued: “The long-term investment case for Asia and emerging markets is unchanged and we believe that committed investors will be rewarded over time.”
Mike van Dulken, head of research at Accendo Markets, said: “Traders in Aberdeen Asset Management shares are jumping ship today almost as quickly as investors did from its funds in the third quarter. The outlook looks little to get excited about, especially with the prospect of rate rises in the agenda on both side so of the pond.”Mike van Dulken, head of research at Accendo Markets, said: “Traders in Aberdeen Asset Management shares are jumping ship today almost as quickly as investors did from its funds in the third quarter. The outlook looks little to get excited about, especially with the prospect of rate rises in the agenda on both side so of the pond.”
Wall Street economists see a 50% chance of the first US rate rise coming in September, the same as last month – despite global turmoil, from Greece’s worsening crisis to China’s woes. Wall Street economists see a 50% chance of the first US rate rise coming in September, the same as last month – despite global turmoil, from Greece’s worsening crisis to woes in China.
Gilbert is expecting the first US rate rise later this year, and the first UK increase early next year.Gilbert is expecting the first US rate rise later this year, and the first UK increase early next year.
Aberdeen has a quarter of its assets invested in emerging markets, but Gilbert said in terms of revenues and sentiment the effect on other parts of the business is bigger. The firm has tried to diversify and has been making small acquisitions – and has been “underweight” on China.Aberdeen has a quarter of its assets invested in emerging markets, but Gilbert said in terms of revenues and sentiment the effect on other parts of the business is bigger. The firm has tried to diversify and has been making small acquisitions – and has been “underweight” on China.
“That hurt us badly on the way up, but in theory China going down should help us,” Gilbert said. Aberdeen funds did not benefit from the rally in Chinese stocks, but were also not exposed to the recent rout, which started in mid-June and prompted Chinese authorities to take unprecedented measures to stem the slide. “That hurt us badly on the way up, but in theory China going down should help us,” Gilbert said. Aberdeen funds did not benefit from the rally in Chinese stocks, but were also not exposed to the recent rout, which started in mid-June and prompted Chinese authorities to take unprecedented measures to halt the slide.