Emerging markets investment trust specialist City of London Investment Group (CLIG) rises 5.6% to 248p on the back of reassuring interims.


As per Ashmore’s (ASHM) second-quarter trading update (14 Jan), City’s results reveal nervousness among investors for emerging market assets, in light of the Federal Reserve’s tapering of quantitative easing and rising benchmark bond yields in the West.


Although the company did not break down market movements and net flows, the fact that funds under management (FUM) finished the half-year period at $3.5 billion, down 6% on the $3.7 billion at the 31 May half-year end, versus a 2% increase in the MSCI Merging Markets Index, says it all.


But the markets may be more interested in the fact that the dividend was maintained during which has been not only a tough trading environment for the company, but also when it has faced considerable operational difficulties, notably the departure in the spring of chief executive officer (CEO) Doug Allison and the finance director Valerie Tannahill.


Founder Barry Olliff, the chief investment officer, stepped up to the CEO role again and seems to have stabilised the ship, with FUM flat between November and December.


CLIG - Comparison Line Chart (Actual Values)


Stockbroker N+1 Singer retains a 'hold' rating and 220p 12-month price target. Analyst Andrew Watson comments: 'At this stage, we retain our current forecasts. We will review our position accordingly if we see evidence that there are grounds to become more positive on the net flow expectations for the EM CEF fund. The yield remains a core attraction at >10%.


'We do not anticipate that the dividend will be cut as long as the financial position remains unchanged.'

Issue Date: 20 Jan 2014