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Investing.com -- UBS downgraded British investment manager Ashmore Group Plc (LON:ASHM) to a “neutral” rating from “buy,” citing that the current market valuation already reflects expectations of a strong recovery in emerging-market (EM) debt fund flows.
The brokerage said Ashmore’s shares are trading at 14.5 times forward earnings, excluding excess capital, one standard deviation above the company’s historical average.
UBS noted that this valuation effectively prices in about 10% of annualized inflows as a share of assets under management, while its forecast expects a more moderate 5% to 6% recovery over 2026 to 2028.
UBS raised its 12-month price target on the stock to 180p from 170p, reflecting a 6% increase, after marking up its earnings estimates for fiscal years 2026 through 2028 by 2% to 3%.
The upward revisions were based on stronger-than-expected EM debt performance during the third quarter of 2025 and slightly improved flow assumptions.
Still, despite the higher target, UBS said the recent rally in Ashmore shares to 182p as of Oct. 7 has balanced the risk-reward outlook, leading to the downgrade.
The brokerage highlighted that although Ashmore remains well positioned to benefit from rising allocations to EM debt amid a weaker U.S. dollar and expectations of lower U.S. interest rates, the stock’s elevated valuation leaves limited upside potential.
UBS expects outflows to continue in the September 2025 quarter before turning to modest inflows of about $0.6 billion in the December quarter.
It forecasts inflows averaging 5% to 6% of AUM per year during 2026-28, below the 10%-20% seen in prior EM debt upcycles.
UBS analysts said that Ashmore’s strong capital position, £470 million in excess capital as of mid-2026, supports its 16.9p dividend even as earnings are projected to fall 29% year-over-year to 8.38p per share in fiscal 2026.
Revenues are expected to decline 3.6% to £137 million, with EBIT margins narrowing to 32.6%.
“While we expect an acceleration of inflows into EM debt, we argue this is largely priced into ASHM’s shares,” UBS said.
“Given ASHM hasn’t yet recorded inflows, we think the market is already pricing in the recovery that hasn’t yet happened.”they added.