Donald Trump election win will 'contribute to ongoing volatility' in global markets, Aberdeen boss warns

Aberdeen Asset Management has reported full-year profits down almost 30 per cent to £352m – a trend that chief executive Martin Gilbert warned may continue under President-elect Donald Trump

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The Independent Online

Aberdeen Asset Management chairman Simon Troughton has warned that President-elect Donald Trump's surprise election win and the UK negotiations surrounding its exit from the EU will contribute to an ongoing volatility in the markets in the short term as annual profits dive.

His comments came as the Scottish group posted a 28 per cent drop in pre-tax profits to £352m on Monday, with £33bn pulled from its funds, in what the firm called a “tough” year.

“Future political and economic events, including the UK's negotiations to exit the EU, the start of President-elect Trump's term in office and European elections, will contribute to ongoing volatility in global markets in the short term,” Mr Troughton said.

“However, until there is greater clarity, it is difficult to predict the impact on markets over the medium and longer term,” he added.

Meanwhile, chief executive Martin Gilbert said: “Economic and political news flow has weighed on investor sentiment and as expected has led to further outflows from our business.”

As a top player in emerging markets funds, Aberdeen Asset Management is an unwitting victim of Mr Trump’s surprise election.

Investors are concerned that Mr Trump’s plans to cut taxes and boost infrastructure spending will drive up interest rates and bond yields in the US, which would then lure investors out of emerging markets equities, the asset class the firm is most well known for.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “Emerging Markets have been out of favour for some time, and outflows from the group’s higher margin EM debt and equity funds have been hitting the business hard.

“There are suggestions that conditions were improving by the end of the summer, as weaker sterling boosted overseas asset values and flows turned positive on emerging market equity products.”

“Unfortunately there is a storm looming in the wings. With a  year-end of 30 September, these results miss the period after the US election when Donald Trump’s ‘America First’ rhetoric caused a significant fall in emerging markets. With Mr Trump looking set to pull out of the Trans-Pacific Partnership, and even calling Nafta into question, it looks like the US could shut its doors to a significant proportion of emerging market output. That could spell trouble ahead.”

Aberdeen was one of several funds forced to suspend dealings in its property fund at the beginning of July as investors attempted to cash out following the Brexit vote.

Despite the fall in profits, investors reacted positively to the annual result with shares jumping over 4 per cent in early trading.

Analysts at Cenkos said: “A year ago we warned that Aberdeen would face a tough year and it has done so, but it has faced those difficult conditions with considerable resilience and, importantly, shareholders have seen a maintained dividend at 19.5p per share declared, a yield of 6.8 per cent.”