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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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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 2020

Global Listed Infrastructure dipped in August as global equities continued their tech-led rally. The best performing infrastructure sector was Airports (+9%), as investors looked past international travel restrictions and further airline capacity cuts to focus instead on the prospect of a medium term recovery. Railroads (+8%) were buoyed by healthy volume recovery and supportive economic indicators (freight); and the emergence of relative value (passenger). The worst performing infrastructure sector was Towers / Data Centres (-4%), which paused for breath after delivering strong positive returns since the start of 2020. Water, Multi- and Electric Utilities (-3% to -1%) also lagged in the risk-on environment.

The best performing infrastructure region was Japan (+8%) where airports and railroads led the gains. The resignation of Japanese Prime Minister Shinzo Abe at the end of the month for health reasons is not expected to have material implications for Japan’s infrastructure stocks. The worst performing infrastructure region was the UK (-2%), reflecting its high utilities weighting.

 

 

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

Market outlook and strategy

The Fund 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.

The macroeconomic outlook remains hard to predict and will depend largely on coronavirus developments / progress. While the ongoing rally in global equity markets appears to imply an imminent V-shaped recovery, we remain alert to the risk of second waves, prolonged recessions and slow recoveries.

Against a more challenging backdrop, cyclical growth would become less valuable than the long term structural earnings growth drivers offered by many infrastructure assets. Examples include the build-out of renewable energy; increasing data mobility / connectivity needs being met by mobile towers and data centres; the electrification of transportation; the reduction of urban congestion; and the ongoing replacement of aged infrastructure assets.

Further, infrastructure could be the target of near term economic stimulus measures. Investment in infrastructure remains highly popular across society, and on both sides of the political divide. Private sector infrastructure investment could provide a useful way for politicians to boost anaemic economic growth rates and reduce high unemployment levels.

 

 

Source : Company data, First Sentier Investors, as of end of August 2020

 

Important Information

This document is prepared by First Sentier Investors (Singapore) (“FSI”) (Co. Reg No. 196900420D.) whose views and opinions expressed or implied in the document are subject to change without notice. FSI accepts no liability whatsoever for any loss, whether direct or indirect, arising from any use of or reliance on this document. This document is published for general information and general circulation only and does not have any regard to the specific investment objectives, financial situation and particular needs of any specific person who may receive this document. Investors may wish to seek advice from a financial adviser and should read the Prospectus, available from First Sentier Investors (Singapore) or any of our Distributors before deciding to subscribe for the Fund. In the event that the investor chooses not to seek advice from a financial adviser, he should consider carefully whether the Fund in question is suitable for him. Past performance of the Fund or the Manager, and any economic and market trends or forecast, are not indicative of the future or likely performance of the Fund or the Manager. The value of units in the Fund, and any income accruing to the units from the Fund, may fall as well as rise. Investors should note that their investment is exposed to fluctuations in exchange rates if the base currency of the Fund and/or underlying investment is different from the currency of your investment. Units are not available to US persons.

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