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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 May 2021

Global Listed Infrastructure delivered stable returns in May, consolidating healthy year-to-date gains. The best performing infrastructure sector was Pipelines (+3%), reflecting exceptionally strong March quarter earnings numbers, a disciplined approach to capex spending, undemanding valuation multiples and a higher oil price. The worst performing infrastructure sectors were Electric Utilities (-2%), Multi-utilities (-1%) and Water Utilities (flat) as investors sought higher beta market segments.

The best performing infrastructure region was Latin America (+5%), which was led higher by its transport infrastructure stocks. Asia ex-Japan (+4%) also rose as investor enthusiasm for Chinese gas utilities’ structural growth and government support resulted in strong share price gains. The worst performing infrastructure region was Australia / NZ (-3%). New lockdown measures in the Australian state of Victoria, implemented following a fresh coronavirus outbreak, weighed on the region’s airports and toll road.

 

 

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. We believe these companies represent exceptional value at current levels. Traffic volumes have proved more resilient than those of other transport infrastructure assets; and toll roads are leading a return to normal demand levels as vaccine programs are rolled out. Using Sydney as a case study, data over 2020 and early 2021 has shown that whilst WFH has clearly impacted CBD office occupancy (consistent with anecdotal evidence of 2-3 days in the office and surveys of a desire to spend some time working from home), the impact on toll road traffic is much less pronounced. In fact, on certain roads, traffic is back to pre-pandemic levels.

The portfolio is also overweight Gas Utilities, The portfolio’s holdings in this sector consist of a Chinese operator benefitting from central government support for the transition to cleaner fuels; a Japanese gas utility trading at deep value, and specialist US and European names operating from strong strategic positions within niche markets.

The portfolio has an underweight exposure to Multi / Electric Utilities, as some utilities are traded at levels where limited mispricing is evident. That said, a substantial portion of the portfolio consists of high conviction positions in this space, with a focus on higher quality assets, material scope for capex-related earnings growth, or clear mispricing.

An underweight exposure to the Pipelines sector has been maintained. While the sector has delivered solid gains in recent months, we remain conscious of the structural headwinds that these companies could face as Net Zero initiatives gather pace.

 

 

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

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.

Applications for units of the Fund must be made on the application forms accompanying the prospectus. Investments in unit trusts are not obligations of, deposits in, or guaranteed or insured by First Sentier Investors (Singapore), and are subject to risks, including the possible loss of the principal amount invested.

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 FSI’s portfolios at a certain point in time, and the holdings may change over time.

In the event of discrepancies between the marketing materials and the Prospectus, the Prospectus shall prevail.

In Singapore, this document is issued by First Sentier Investors (Singapore) whose company registration number is 196900420D. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore. First Sentier Investors (registration number 53236800B) is a business division of First Sentier Investors (Singapore).

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