Global Listed Infrastructure monthly review and outlook

Global Listed Infrastructure declined in September against the backdrop of a sharp rise in global bond yields and interest rate increases by central banks in the US, EU, Japan and Australia.   

The best performing infrastructure sector was Other (+4%), which consists of companies with weaker infrastructure characteristics, such as ports and satellites, that are screened out of our Focus List. Performance was driven primarily by Emerging Markets port stocks, reflecting recent growth in freight volumes.

The worst performing infrastructure sector was Towers / Data Centres (-8%). US mobile tower stocks contracted cash flows and relatively high leverage saw them underperform as US 10-year Treasury yields reached their highest level since 2002. Energy Midstream (-7%) also lagged as investors took profits following strong year-to-date gains.

The best performing infrastructure region was Latin America (+6%). Growing expectations that Brazil’s October presidential election could result in a more economically orthodox administration drove broad-based gains for the country’s infrastructure stocks and wider equity market. A mid-month interest rate cut by the Central Bank of Brazil provided an additional tailwind. The worst performing infrastructure regions included Australia / NZ (-6%), as rising bond yields weighed on its toll road operator.

The Fund returned -4.9% after fees in September¹, 12 basis points ahead of the FTSE Global Core Infrastructure 50/50 TR Index (SGD). 

The portfolio's best-performing holding was Brazilian toll road operator Motiva (+13%), which operates a ~5,000km toll road network including the main highway connecting Rio de Janeiro and Sao Paulo – the country’s two most populous cities. Hopes of a more favourable political environment following October’s presidential election supported gains in the Brazilian equity market and contributed to a decline in government bond yields, in marked contrast to trends seen elsewhere. Motiva’s toll road concessions generate long-term, predictable cash flows; as a result, its valuation multiples tend to benefit from falling bond yields.

Similar factors supported Brazil freight rail operator Rumo (+8%), whose rail networks transport agricultural products from Mato Grosso in central Brazil to the Port of Santos on the country’s south-east coast. Reports that a consortium was in advanced discussions to acquire a 15% stake in the company from Brazilian conglomerate Cosan also stirred interest in the stock.

Transport infrastructure stocks from other regions also performed relatively well. Mexican airport GAP (+6%) held up as investors identified value following recent share price declines. Passenger traffic was resilient in August, with a 4% increase in domestic passenger volumes and flat international volumes, compared to the same period a year earlier. French peer Groupe ADP (-1%) fared relatively well as investors anticipated that the terms of its 2027-2034 regulatory framework, widely viewed as favourable for the company, would receive French government approval before the end of the year. West Japan Railway (-1%), whose passenger rail network serves Japan’s Kansai region, including the major cities of Osaka and Kyoto, reported solid passenger volumes for August. This appears to have been driven by a shift from international to domestic travel in response to higher airfares.

The portfolio's worst-performing holdings were US tower operators SBA Communications (-16%) and Crown Castle (-11%). Both companies declined as higher bond yields weighed on the towers sector. Persistent concerns about the slowing pace of tower leasing activity, and continued uncertainty around whether SpaceX subsidiary Starlink represents complementary or competing technology, also weighed on sentiment towards these stocks.

Having delivered strong year-to-date gains, energy midstream stocks including ONEOK (-11%), Targa Energy (-8%) and Cheniere Energy (-8%) weakened. In the absence of material company-specific news, these share price declines also appear to have been driven largely by concerns about higher bond yields. All three companies either have significant growth-related capital expenditure plans or have recently announced large acquisitions; higher borrowing costs could affect the economics of future projects. At the margin, high-profile opposition to US data centre development may have also raised concerns that future demand for additional natural gas infrastructure may now be lower than had previously been assumed. North American energy midstream’s long-term growth drivers – US LNG exports, production growth in the Permian basin and rising electricity demand – remain intact.

US utility holdings underperformed during the month, owing to rising bond yields, growing community resistance to the buildout of new data centres and increased political scrutiny on customer bill affordability ahead of November’s mid-term elections. These factors weighed on holdings in large-cap regulated utilities including NextEra Energy (-8%) and Public Service Enterprise Group (-7%). Peers with fast-growing Texas service territories such as American Electric Power (-3%) and Sempra (-4%) proved more resilient.    

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.

A holding in US-listed gas utility and energy midstream operator UGI Corp was sold following a period of strong share price gains, driven by reports that it was the subject of private equity takeover interest. Reduced mispricing moved the stock to a lower ranking within the investment process.  

The strategy invests in a range of listed infrastructure assets including toll roads, airports, railroads, utilities and renewables, energy midstream, wireless towers, and data centers. 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 asset class remains supported by several structural growth drivers. Electric utilities face rising capital expenditure requirements as Artificial Intelligence (AI) adoption and data centre growth drive substantial increases in electricity demand. As well as adding power generation capacity, utilities are investing to expand, modernise, and strengthen their electricity transmission and distribution grids. Under the US regulatory model, this increased capital investment typically translates into rate base growth, which in turn supports earnings growth. While policymakers’ focus on affordability and data center pushback have grown in recent months, these developments are moderating, not stopping, infrastructure capital investment. We believe the long-term opportunity for utilities remains substantial.

Digitalisation remains another key theme for the asset class. Data centers continue to benefit from companies migrating IT equipment from on-premises environments to co-location facilities and cloud-based platforms, attracted by greater flexibility, scalability, and reliability. Additionally, the surge of interest in AI is driving data center demand, as well as increasing demand for electricity.  We expect structural growth in demand for mobile data, underpinned by increasing reliance on digital connectivity, to support steady revenue growth in the mobile tower sector. Rising interest rates weighed on US mobile towers in September. This risk is now better reflected in valuation multiples. At current levels, these stocks represent an opportunity for long-term investors to invest in high-quality, cash generative businesses at attractive valuations.

Airports are well-positioned to benefit from the ongoing drivers behind global travel demand growth, including wealthy baby boomers with disposable income to spend on travel during their retirement, Gen Z prioritising experiences over possessions, and the expansion of middle-class populations in Asia and Latin America. Projections from the International Air Transport Association anticipate continued growth in global air travel demand, with passenger traffic projected to expand at a compound annual growth rate of between 3.1% and 3.6%, over the 2024-2044 period.     

Source: Company data, First Sentier Investors, as of 30 Sept 2026.