Ashmore shares climb on upgrade to Buy

Investing.com -- Shares of Ashmore Group Plc (LON:ASHM) rose by 6.43% following an upgrade by UBS analysts to a Buy rating, with a new price target suggesting a 20% upside.

The financial services firm has been recognized for its potential to benefit from a shift in investor allocations away from U.S. capital markets and a weaker U.S. dollar, which could lead to increased inflows into emerging market debt and equity strategies.

The upgrade comes after Ashmore experienced more than five years of consecutive outflows, excluding low-margin overlays. However, the company's flow picture has shown significant improvement in 2024, a trend that has persisted despite the stronger U.S. dollar post-U.S. presidential elections.

Analysts expect institutional investor allocations to emerging market (EM) debt and equity strategies to rise, following a period of multi-decade lows in the previous year.

UBS analysts have raised their EPS estimates for 2026/27 by 2%/6%, accounting for a more optimistic flow outlook and increasing their 2025/26 flow projections by 300-400 basis points as a percentage of AUMs.

"The improvement in recent fund flows, the likelihood for an acceleration in fund flows as investors reallocate from the US and the lower valuation the market ascribes to ASHM's asset management business, creates positively skewed risk-reward profile," UBS said in a note.

The firm's valuation, excluding capital surplus, is near record lows, which, coupled with the improved flow momentum and investor rotation out of U.S. capital markets, presents a favorable risk-reward scenario for the stock.