Ashmore Group returns hit by China debt exposure, says Credit Suisse

By Tom Arnold and Joice Alves

LONDON, Aug 6 (Reuters) - Ashmore Group's exposure to Chinese debt is dragging down its returns, Credit Suisse said in a note on Friday as it lowered its price target on the emerging market specialist, sending its share price down almost 4% in early trade.

Worries about debt woes at developer China Evergrande Group

, state asset manager Huarong and other companies have roiled Chinese debt markets in recent months.

Ashmore, as one of the most prominent investment managers dedicated to emerging markets, is particularly exposed to China with the country accounting for around 9% of its assets under management, according to Credit Suisse.

The firm holds the majority of its assets under management in confidential accounts, making it tricky to get an accurate overview of its overall exposure.

Publicly-disclosed Ashmore bond funds underperformed flat-to-slightly positive key JPMorgan bond indexes in July, with Ashmore's EM Short Duration fund down 3.9%, Credit Suisse said in a note on Friday.

The bank lowered its forecast for Ashmore's first quarter 2022 market returns to -0.9% from 1.7%.

"We attribute the relative weakness of Ashmore returns to a higher allocation to Chinese debt," research analysts Haley Tam, Enrico Bolzoni and Ella Hughes wrote.

Ashmore's SICAV EM Total Return had a 12.5% weighting to China versus the benchmark's 7.2%, while the SICAV EM Short Duration had exposure of 19.9%, nearly double the benchmark exposure, said Credit Suisse.

Ashmore declined to comment.

The company last month reported net inflows of $1.1 billion for the most recent quarter, driven by institutional clients.

Credit Suisse reduced its share price target for Ashmore to 380 pence from 400 pence and lowered its forecast earnings per share for the years 2021-2023, reflecting a change in the U.S. dollar to British pound exchange rate the bank used.

Ashmore's shares fell 3.8% at the market open in London, before paring losses to stand down 2.8% in later trading.

(Editing by Kirsten Donovan)

((Tom.Arnold@thomsonreuters.com; +442075428510; Reuters Messaging: tom.arnold.thomsonreuters.com@reuters.net))