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

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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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Important Note Click to maximise

Please read the following important information for First Sentier Global Listed Infrastructure Fund

• The Fund invests primarily in global listed infrastructure and infrastructure-related equity securities or equity related securities worldwide. Investments in infrastructure projects may involve risks including projects not being completed on time and within budget, changes in environment laws and regulations.

• The Fund’s investments may be concentrated in a single and limited/specialist sector or in fast growing economies which may have higher volatility or greater loss of capital than more diversified portfolios. The Fund may also expose to RMB currency and conversion risk.

• Small/ mid-capitalisation securities may have lower liquidity and their prices are more volatile to adverse economic developments.

• The Fund may use FDIs for hedging and efficient portfolio management purposes, which may subject the Fund to additional liquidity, valuation, counterparty and over the counter transaction risks

• For certain share classes, the Fund may at its discretion pay dividend out of capital or pay fees and expenses out of capital to increase distributable income and effectively a distribution out of capital. This amounts to a return or withdrawal of your original investment or from any capital gains attributable to that, and may result in an immediate decrease of NAV per share.

• It is possible that a part or entire value of your investment could be lost. You should not base your investment decision solely on this document. Please read the offering document including risk factors for details.

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 January 2024

Global Listed Infrastructure dipped in January, giving back some of the strong gains achieved during the December quarter of 2023. The FTSE Global Core Infrastructure 50/50 index returned -2.4% while the MSCI World index^ ended the month +1.2% higher.

The best performing infrastructure sector was Other (+6%), which consists of ports, satellites and merchant power operators. Emerging Markets (EM) ports led this group of stocks higher. Railroads (+1%) also increased, as investors focused on the scope for North American freight rail volumes and margins to improve over the course of coming months. Japanese passenger rail stocks were buoyed by positive passenger trends. The worst performing infrastructure sector was Towers / Data Centers (-7%), as positive economic indicators saw interest rate cut expectations subside.

The best performing infrastructure region was Japan (+5%) owing to strong returns from the country’s electric utilities (not in our Focus List). The worst performing infrastructure region was the United States (-4%), as a protracted timeframe for expected interest rate cuts weighed on its Towers and Utilities.


^ MSCI World Net Total Return Index (USD) is provided for information purposes only. Index returns are net of tax. Data to 31 January 2024. Source: First Sentier Investors / Lipper IM. All stock and sector performance data expressed in local currency terms. Source: Bloomberg.

Fund performance

The Fund returned -3.6% after fees in January, -120bps behind the FTSE Global Core Infrastructure 50/50 Index (USD, Net TR).

The best performing stock in the portfolio was Italian multi-utility Hera (+10%). Operating primarily in North-East Italy, the company owns a diversified portfolio of gas, electricity and water distribution assets, along with waste collection and treatment businesses. The announcement of its 2023-2027 business plan, which outlined a higher earnings growth rate alongside a robust capex investment plan and solid balance sheet metrics, met with a warm market reception. West Japan Railway (+5%), whose rail network covers Japan’s Kansai region and includes the major cities of Osaka and Kyoto, gained as investors anticipated strong 2024 earnings.

French-listed infrastructure construction and concessions company Vinci (+3%) rose after raising its free cash flow forecasts for the year. Favourable market trends and the integration of recent acquisitions are proving supportive of its Energies division, which provides technical services for energy, transport and communication infrastructure. Passenger volumes remain healthy for Swiss airport operator Flughafen Zurich (+2%), which announced new tenants, and expansions for some existing ones, at its Circle property business during the month. Budget airline Ryanair revealed it was aiming to grow passenger traffic to Spain from the 55 million forecast for 2024 to 77 million by 2030 — a move which would benefit Spanish airport operator AENA (flat).

The worst performing stock in the portfolio was Chinese water utility Guangdong Investment (-20%), which is predominantly involved in water supply and sewage treatment as well as other businesses including property development. The company fell after a write-down for some property inventory in 2023, owing to the continued downturn in the real estate market, sparked concerns that its distribution growth rate may be affected. Other Chinese infrastructure holdings including Beijing Airport (-1%) and gas utility ENN Energy (+1%) held up better, aided by undemanding valuation multiples. Chinese toll road operator Jiangsu Expressway (+6%) was supported by the prospect of recovering traffic volumes in 2024. Investors also welcomed management comments on the firm’s strategic direction, which reiterated the firm’s commitment to its core toll road assets.

Healthy economic data from the US weighed on tower operators American Tower (-9%) and Crown Castle (-6%), as investors drew the conclusion that hoped-for interest rate cuts may take longer to implement than market consensus had previously assumed. During the month Crown Castle delivered better than expected December quarter earnings, while American Tower announced it had sold its India tower business to an unlisted infrastructure manager for US$2.5 billion.

Utilities also came under pressure during the month. US regulated utility Eversource Energy (-12%) fell after writing down the value of its stakes in three Atlantic Ocean offshore wind projects, that it is in the process of divesting, by a total of between US$1.4 billion and US$1.6 billion. UGI Corp (-10%) lagged as the market was disappointed with the progress of their Strategic Review and milder winter weather. However some of these losses were recouped in early February as they announced an update may be provided with the next quarterly earnings release. UK renewables and networks-focused utility SSE plc (-8%) also underperformed as negative news from offshore wind peers and concerns for lower power prices weighed on its share price.

Fund activity

The Fund divested its holding in US east coast freight rail company CSX Corp, on a relative valuation basis. The proceeds were used in part to add to an existing position in east coast peer Norfolk Southern, which we believe has greater scope to increase earnings and operational efficiency metrics from current levels.

Market outlook and fund positioning

The Fund 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.

Earnings growth for the asset class is likely to be underpinned by a number of structural growth themes over coming years. 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 global 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. Overall electricity demand is expected to grow in many regions, driven in part by additional data centres needed to support internet activity and the AI boom.

Digitalisation is another key theme for the asset class. We expect structural growth in demand for mobile data (underpinned by an ever-growing reliance on digital connectivity) to support long-term earnings growth for Towers and Data Centres. The adoption of 5G technology over coming years will require networks to handle increased data speed, as well as a much higher number of connected devices.

There remains scope for continued recovery in the transport infrastructure space. We believe toll roads represent exceptional value at current levels, with traffic volumes proving resilient and inflation-linked concession agreements helping to support earnings growth. We also have a largely positive view of North American freight railroads. While the sector faced challenges in 2023, these companies are unique and valuable franchises. Their wholly-owned track networks are high quality infrastructure assets which can never be replicated. They typically operate under duopoly market conditions, with significant numbers of captive customers such as grain, chemical and auto producers giving them strong pricing power over long haul routes. Improving operating efficiency provides further scope to grow earnings. However, we believe some caution is merited currently, owing to recent volume softness.

Source : Company data, First Sentier Investors, as of 31 January 2024.

These figures refer to the past. Past performance is not a reliable indicator of future results. For investors based in countries with currencies other than the base currency of the share class, the return may increase or decrease as a result of currency fluctuations. Performance data calculated since the launch date. Performance data is calculated on a net basis by deducting fees incurred at fund level (e.g. the management and administration fee) and other costs charged to the fund (e.g. transaction and custody costs), save that it does not take account of initial charges or switching fees (if any). Income reinvested is included on a net of tax basis. First Sentier Global Listed Infrastructure Fund, Class I (Distributing) USD shares. Benchmark is the FTSE Global Core Infra 50/50 TR Index from 1 April 2015, prev. UBS Global Infra & Utilities 50/50 TR Index.


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 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, FSSA Investment Managers, Stewart Investors, Realindex Investments and Igneo Infrastructure Partners are the business names of First Sentier Investors (Hong Kong) Limited.

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.