Close

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

Discover more
Close

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.

Discover more

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 March 2024

Global Listed Infrastructure rose in March against a backdrop of broadly positive investor sentiment. The best performing infrastructure sector was Energy Midstream (+6%), aided by a favourable demand outlook and rising commodity prices. Utilities / Renewables (+6%) also gained, helped by a growing awareness of likely increases in load growth (electricity demand) over coming years, driven by demand from data centres / AI, industrial on-shoring and electric vehicle charging. The stabilising interest rate environment also proved supportive. The worst performing infrastructure sector was Toll Roads (-1%), owing to concerns for political risk.

The best performing infrastructure region was Japan (+11%), whose electric utilities gained on indications of further progress towards nuclear plant restarts. The worst performing infrastructure region was Australia / New Zealand (flat), reflecting mixed returns from the region’s transport infrastructure stocks.

Fund performance

The Fund returned +2.9% after fees in March1, 99 basis points behind the FTSE Global Core Infrastructure 50/50 TR Index (SGD).

The best performing stock in the portfolio was large-cap US regulated electric utility and renewables developer NextEra Energy (+16%). During the month the company held a well-received Investor Day, setting out a robust case for renewables’ future growth prospects and highlighting its competitive advantages in this space. In a further positive for the stock, a long-running investigation into whether NextEra’s utility business had breached Florida election rules was closed during the month, with no finding of wrongdoing.

Midwest peer Evergy (+9%), which provides electricity to 1.7 million customers in Kansas and Missouri, gained on favourable regulatory developments in its Kansas service territory — historically a challenging jurisdiction for the company. Several other regulated US utility holdings including Southern Company (+7%), Exelon (+6%) and Alliant Energy (+6%) also delivered robust gains during the month. In the absence of material stock-specific news, these gains appear to have been driven by a growing focus on the long-term demand drivers for the utilities sector mentioned above, as well as the attractive value currently on offer within this space. 

Houston-based energy midstream company Targa Resources (+14%) continued its strong run. The company, whose gathering & processing, transportation & storage and export infrastructure assets are focused on Texas’ Permian Basin, was supported by a robust production growth outlook across its areas of operation. DT Midstream (+7%) also performed well. The company’s assets include the LEAP Gathering Lateral Pipeline, which transports natural gas from the Haynesville Basin in Louisiana to the US Gulf Coast. During the month, ongoing legal disputes (unrelated to DT Midstream) saw the expected completion dates for two other pipeline projects in the region – potential competitors to LEAP — pushed out from 2024 to 2025.

In the airports sector, Flughafen Zurich (+10%) announced healthy 2023 earnings numbers. Business travellers have recovered to 22% of its passenger mix, close to pre-COVID levels of 26%. The construction of Noida International Airport near New Delhi, which Zurich will operate as a concession until 2061, is progressing on schedule. Mexican peer ASUR (+5%) rose after reporting a year-on-year increase in passenger traffic of 4.8% for February 2024. Spanish operator AENA (+4%) appears set to benefit from indications of strong summer demand for low cost carrier EasyJet, which operates a number of routes to Spanish airports.

The worst performing stock in the portfolio was Chinese water utility Guangdong Investment (-28%), which announced a larger-than-expected dividend cut and left investors unclear as to the likely level of future dividend payments. Generally stable earnings from the company’s water business in 2023 were offset by impairments within its property development segment. Having gained strongly in February, Beijing Airport (-6%) and ENN Energy (-6%) gave up ground as lacklustre 2023 earnings numbers weighed on both stocks, and hopes of government support measures for the Chinese equity market faded.

US freight rail operator Union Pacific (-3%) dipped in March, as investors took profits following strong share price gains in recent months. The stock has benefitted from investor anticipation of operational improvements, following the appointment of Jim Vena as CEO in August 2023. Australian toll road operator Transurban (-2%) underperformed as the publication of the New South Wales Independent Toll Review Interim Report provided a reminder of the potential political risk faced by its network of Sydney toll roads. While the report’s authors proposed several revisions to existing tolling frameworks, legally binding concession agreements mean the company remains in a strong position to negotiate a fair outcome with the government.

 

1 Fund performance is based on the Singapore unit trust, net of fees, expressed in SGD terms.
All stock and sector performance data expressed in local currency terms. Source: Bloomberg. 

Fund activity

No new stocks were added to the portfolio during the month, and positions in existing holdings were generally maintained at current weights. 

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 are optimistic about the substantial investment opportunities associated with the decarbonisation of the world’s energy needs. Utilities 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. 

Our team’s recent meetings with US utility management teams have been characterized by optimism that demand growth for electricity is set to increase materially over coming years. This is likely to bolster the need for transition fuels such as natural gas, which have a crucial role to play in maintaining energy reliability and affordability. As well as underpinning utilities’ earnings growth, this is also likely to drive additional demand for North American energy midstream storage and transportation assets.

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. 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. The surge of interest in AI is driving data center demand, as well as boosting the need for electricity.

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

 

Important Information

This material is prepared by First Sentier Investors (Singapore) (“FSI”) (Co. Reg No. 196900420D.) whose views and opinions expressed or implied in the material are subject to change without notice. To the extent permitted by law, FSI accepts no liability whatsoever for any loss, whether direct or indirect, arising from any use of or reliance on this material. This material 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 material. 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 material is issued by First Sentier Investors (Singapore) whose company registration number is 196900420D. This advertisement or material has not been reviewed by the Monetary Authority of Singapore First Sentier Investors (registration number 53236800B), FSSA Investment Managers (registration number 53314080C), Stewart Investors (registration number 53310114W), RQI Investors (registration number 53472532E)  and Igneo Infrastructure Partners (registration number 53447928J) are the business divisions of First Sentier Investors (Singapore).

First Sentier Investors (Singapore) 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..

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.