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Specialist in Asia Pacific, Japan, China, India and South East Asia and Global Emerging Market equities.

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Our philosophy is very simple. We are constantly searching for high quality businesses and when we acquire them, we will work relentlessly with them to create long-term sustainable value through innovation, ESG-led and proactive asset management.

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Stewart Investors manage investment portfolios on behalf of our clients over the long term and have held shares in some companies for over 20 years. They launched their first investment strategy in 1988.

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Global Listed Infrastructure Monthly review and outlook

Global Listed Infrastructure Monthly review and outlook

A monthly review and outlook of the Global Listed Infrastructure sector.

Market review - as at August 2022

Global Listed Infrastructure held up relatively well in August as renewed concerns about inflation and rising interest rates weighed on financial markets. The FTSE Global Core Infrastructure 50/50 Index declined -1.5% while the MSCI World Index^ ended the month -4.2% lower.

The Airports (+3%) sector gained as June quarter earnings numbers highlighted positive operating leverage to improving passenger volumes. The worst performing infrastructure sector was Towers/Data Centres (-6%). These relatively interest rate-sensitive stocks lagged after a speech by the head of the US Federal Reserve emphasised a determination to keep raising interest rates until inflation subsides.

The best performing infrastructure region was Latin America (+8%), reflecting strong returns from Mexico’s airports and Brazil’s railroads and toll roads. The worst performing infrastructure region was the United Kingdom (-5%). Its utilities fell after higher natural gas prices caused a sharp rise in the regulator-set limit on UK consumer energy bills from October onwards. This led to concerns about the potential need for changes to the regulatory model, or political intervention.

 

^ MSCI World Net Total Return Index (USD) is provided for information purposes only. Index returns are net of tax. Data to 31 August 2022. Source: First Sentier Investors / Lipper IM. All stock and sector performance data expressed in local currency terms. Source: Bloomberg.

Market outlook and Strategy

The Portfolio invests in a range of listed infrastructure assets including toll roads, airports, railroads, utilities and renewables, energy midstream, wireless towers and data centres. These sectors share common characteristics, like barriers to entry and pricing power, which can provide investors with inflation-protected income and strong capital growth over the medium-term.

Against an unpredictable economic backdrop, listed infrastructure remains supported by a number of structural growth drivers. We remain optimistic about the substantial investment opportunities associated with the decarbonisation of the world’s energy needs. Utilities, which represent about a half of the listed infrastructure opportunity set, are positioned to derive steady, regulated earnings growth by building solar and wind farms, and by upgrading and expanding the networks needed to connect these new power sources to the end user. In the medium term, the roll-out of electric vehicles is then expected to provide an additional boost to utilities — first from investment opportunities associated with linking EV charging stations to the grid; and then from higher overall demand for electricity. Our strategy has a long-held preference for US over UK/European utility companies, owing to relatively transparent and fair US regulatory frameworks and historically lower levels of US political and regulatory interference.

Digitalisation is another key theme for the asset class. Structural growth in demand for mobile data (underpinned by an ever-growing reliance on digital connectivity) continues to support steady earnings growth for Towers and Data Centres, insulating them from the ebbs and flows of the broader global economy. The changes required during the pandemic have already led to a greater reliance on wireless data in many people’s everyday lives. The adoption of 5G technology over the medium term will require networks to handle increased data speed, and a much higher number of connected devices.

Source: Company data, First Sentier Investors, as of 31 August 2022.

Important information

Investment involves risks, past performance is not a guide to future performance. Refer to the offering documents of the respective portfolios for details, including risk factors. The information contained within this material has been obtained from sources that First Sentier Investors (“FSI”) believes to be reliable and accurate at the time of issue but no representation or warranty, expressed or implied, is made as to the fairness, accuracy or completeness of the information. To the extent permitted by law, neither FSI, nor any of its associates, nor any director, officer or employee accepts any liability whatsoever for any loss arising directly or indirectly from any use of this. It does not constitute investment advice and should not be used as the basis of any investment decision, nor should it be treated as a recommendation for any investment. The information in this material may not be edited and/or reproduced in whole or in part without the prior consent of FSI.

This material is issued by First Sentier Investors (Hong Kong) Limited and has not been reviewed by the Securities and Futures Commission in Hong Kong. First Sentier Investors is a business name of First Sentier Investors (Hong Kong) Limited.

Reference to specific securities (if any) is included for the purpose of illustration only and should not be construed as a recommendation to buy or sell the same. All securities mentioned herein may or may not form part of the holdings of First Sentier Investors’ portfolios at a certain point in time, and the holdings may change over time.

First Sentier Investors (Hong Kong) Limited is part of the investment management business of First Sentier Investors, which is ultimately owned by Mitsubishi UFJ Financial Group, Inc. (“MUFG”), a global financial group. First Sentier Investors includes a number of entities in different jurisdictions.

To the extent permitted by law, MUFG and its subsidiaries are not responsible for any statement or information contained in this material. Neither MUFG nor any of its subsidiaries guarantee the performance of any investment or entity referred to in this material or the repayment of capital. Any investments referred to are not deposits or other liabilities of MUFG or its subsidiaries, and are subject to investment risk, including loss of income and capital invested.