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 July 2021

Global Listed Infrastructure gained in July, as quarterly earnings results highlighted the resilience and essential service nature of the asset class. The FTSE Global Core Infrastructure 50/50 index gained +1.3%, while the MSCI World index^ ended the month +1.8% higher. 

The best performing infrastructure sectors were Water / Waste (+9%) and Electric Utilities (+4%), as investors sought defensive assets against a backdrop of rising Delta variant case numbers. The worst performing infrastructure sector was Pipelines (-2%), which consolidated strong year-to-date gains. Toll roads (-1%) also lagged, with Emerging Market operators affected by the uncertain pace of traffic recovery.

The best performing infrastructure region was Australia / NZ (+6%), as takeover bids for Sydney Airport (+35%, not held) and Spark Infrastructure (+24%, not held) provided the latest reminder of the intrinsic value available to investors within this asset class. The worst performing infrastructure region was Japan (-4%), as rising coronavirus case numbers and a longer and broader State of Emergency weighed on the country’s passenger rail stocks.


^ MSCI World Net Total Return Index, USD

All stock and sector performance data expressed in local currency terms. Source: Bloomberg.

Market outlook and strategy

The Portfolio invests in a range of global listed infrastructure assets including toll roads, airports, railroads, utilities, pipelines, and wireless towers. 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.

Toll roads represent the portfolio’s largest sector overweight, via positions in European, Asia Pacific and Latin American operators. We believe these companies represent exceptional value at current levels, with traffic volumes proving significantly more resilient than those of other transport infrastructure assets. While new coronavirus variants have clouded the near term outlook, we remain confident that toll roads will lead a return to normal demand levels as economic activity levels pick up. 

The portfolio is also overweight water / waste companies. This exposure consists of stable, income-generative UK and US-listed water utilities, deriving regulated earnings from the provision of essential services. The pressing need for investment to replace and repair aging water pipe networks in the US represents an additional source of long-term earnings growth. The portfolio has also built a position in US waste management company Republic Services, which stands to benefit from higher waste volumes as the US economy continues to improve.

The portfolio is underweight electric / multi-utilities. While these companies represent a large segment of the global listed infrastructure universe, and are a good source of yield and defence, some have traded up to levels where limited mispricing is evident. That said, a substantial portion of the portfolio still consists of high conviction utility holdings. The portfolio’s focus is on companies with the scope to derive steady, low risk earnings growth from rate base investment (replacing ageing distribution networks, upgrading substations, expanding transmission lines); and the replacement of older coal-fired power stations with wind farms and solar power. 

The portfolio also has an underweight exposure to Pipelines owing to the structural headwinds that these companies could face over the medium and long term, as decarbonization and Net Zero initiatives gather pace. Strong year-to-date gains for these companies have also contributed to our relatively cautious view. Within this space, the portfolio’s exposure is focused on those stocks that have agreed long term contracts with high quality counterparties; with lower sensitivity to commodity price movements. 


Source : Company data, First Sentier Investors, as of end of July 2021.

Important Information

Investment involves risks, past performance is not a guide to future performance. Refer to the offering documents of the respective funds for details, including risk factors. The information contained within this document 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. 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 document may not be edited and/or reproduced in whole or in part without the prior consent of FSI.

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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.

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