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 July 2020

Global Listed Infrastructure resumed its upward trajectory in July, aided by better than expected earnings for much of the asset class. The best performing infrastructure sectors were Multi-, Water and Electric Utilities (+5% to +7%) as solid earnings results highlighted the ability of these companies to weather a slowing economic environment. US electric utilities led the gains, after the release of an updated climate plan sparked hopes that already-substantial measures to roll out renewables may be accelerated under a Biden presidency.

The worst performing infrastructure sector was Airports (-9%), as the complications of reopening international travel while coronavirus cases remain widespread became increasingly apparent. Toll Roads (-3%) also lagged, despite steady traffic recovery in those cities that are successfully navigating coronavirus impacts.

The best performing infrastructure region was USA (+6%), reflecting strong demand for its substantial utilities sector. The worst performing infrastructure region was Japan (-13%) where a deteriorating coronavirus situation weighed on the country’s passenger rail and airport stocks.



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 portfolio remains positioned with toll roads as its largest sector overweight. Valuation multiples still imply multi-year traffic declines, in contrast to the improvements that toll road companies referenced in recent quarterly earnings updates. While increased flexibility to work-from-home may result in adjustments to traffic, we see mounting evidence that people prefer to travel by private car than by public transport in order to maintain social distancing.

We remain cautious on the Airports sector. A sustained recovery in airline passenger numbers appears a remote prospect, given to traveller wariness and resurgent coronavirus case numbers in many regions. A staggered re-opening of airports may start with domestic or regional flights, which are less valuable than international flights.

A prudent approach has also been maintained towards North American freight rail stocks. We admire these high quality, well managed infrastructure businesses, but remain conscious of their sensitivity to the economy. Despite a clouded outlook for freight volumes, they continue to trade at historic high multiples. Earnings forecasts reflect expectations of a sharp recovery, which our analysis suggests is an overly optimistic scenario.

The Fund has a small overweight exposure to Multi/Electric utilities. Many good quality utilities are trading at relatively appealing levels, having underperformed in recent rising markets. Regulated utility earnings should be materially more resilient than those of the broader market in the event of an extended economic slowdown or recession. Lower interest rates will be supportive of valuation multiples. Share price gains this month appeared to reflect renewed investor recognition of the longer term structural growth drivers (build-out of renewables, replacement of aged networks) for this sector.


Source : Company data, First State Investments, as of end of July 2020.

Important Information

This document is prepared by First State Investments (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 State Investments (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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