Ashmore Group (LSE:ASHM) has been downgraded by UBS as the share's valuation already reflects a strong recovery in emerging market (EM) debt inflows.
The FTSE 250 group's core business now trades at 14.5 times forward earnings, analyst Michael Werner pointed out, around one standard deviation above its historical average.
This implies inflows of about 10% of assets under management, double his forecast of 5-6%.
So, despite raising his 2026-28 earnings estimates by 2-3% and lifting its share price target to 180p from 170p, Werner cut his rating to 'neutral' from 'buy'.
This followed stronger-than-expected EM debt performance in recent months.
However, Werner said the "risk-reward profile is balanced", with EM debt "on a tear" as investors anticipate a weaker US dollar and lower US rates.
While he expects Ashmore to benefit from improving EM fund flows, he believes the current valuation already prices in a healthy recovery, prompting the downgrade.