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Capital Markets

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Categorized | Equities

Ashmore slips amid rising inflation expectations

Posted on November 11, 2016

Ashmore hit a four-month low on Friday as emerging markets bore the brunt of rising inflation expectations in the wake of Donald Trump’s US election victory.

Ashmore, a debt-fund specialist and dollar earner, dropped 9 per cent to 298.8p as investors moved to price in a US-led infrastructure spending spree and an end to low global growth and inflation. Peers also slumped with Aberdeen Asset Management down 7 per cent to 288.4p.

Sterling’s rebound and a falling oil price combined to sink the wider market with the FTSE 100 dropping 1.4 per cent, or 97.55 points, at 6,730.43.

Packaging maker Mondi, which counts on emerging markets for about half its sales, slid 4.7 per cent to £15.17. Deutsche Bank questioned whether this reaction was logical, given Mondi is largely reliant on eastern Europe and domestic Russian sales.

Among the gold miners, Polymetal fell 4.9 per cent to 836.5p following a report in the Russian media that PPF Group, its 13 per cent shareholder, has been looking to sell the stake.

Building materials companies faded following a profit warning from roofing and insulation supplier SIG, which tumbled 21.8 per cent to 90.5p.

SIG blamed UK demand, saying September and October had been disappointing and that “one major competitor” had cut prices aggressively. Travis Perkins, of SIG’s biggest UK competitors, slipped 0.9 per cent to £14.01.

“With SIG still trading below peers and key management now in a state of transition, investors are likely to question whether SIG has a future as an ongoing listed entity in its current form,” said Deutsche Bank.

High street retailers were helped both by sterling’s rally and by BDO weekly data that showed apparel sales boosted by the recent cold snap.

Marks and Spencer gained 3.3 per cent to 327.2p, also helped by revived bid speculation, while Next was up 3 per cent to £50.40.

EasyJet rose 1.6 per cent to £10.55 and British Airways owner IAG took on 1.4 per cent to 440.6p. Berenberg started coverage of both stocks with “buy” ratings.

Next year looks tough for the airlines sector as the benefits of cheaper fuel give way to worries about capacity growth and the implications of Brexit, said Berenberg.

But EasyJet’s valuation already prices in these concerns while IAG can damp the effects by delivering “large, sustainable cost cuts, particularly at British Airways”, it said.

BAE Systems slipped from a record high, down 3.5 per cent to 590.5p. Business development director Alan Garwood sold shares for £200,000.

Drugmaker Shire lost 1.7 per cent to £49.98 after US data showed prescriptions for its Xiidra eye treatment, launched in August, were flat against the previous week.