Global Listed Infrastructure monthly review and outlook

Global Listed Infrastructure delivered mixed returns in July, despite healthy quarterly earnings results. The best performing infrastructure sector was Railroads (+6%), driven by strong earnings from North American freight rail operators and gains among Japanese passenger rail companies.    

The worst performing infrastructure sector was Airports (-3%). European airport operators delivered mixed returns as tensions between the US and Iran escalated, while underwhelming earnings and the lack of a hoped-for FIFA World Cup-related boost to passenger numbers weighed on Mexican peers.

The best performing infrastructure region was Japan (+5%), reflecting pleasing gains across its passenger rail and airport stocks. The worst performing infrastructure region was Latin America (-5%), where Mexican airport underperformance more than offset positive returns for Brazil’s road and rail stocks.

The Fund returned -0.2% after fees in July¹, in line with the FTSE Global Core Infrastructure 50/50 TR Index (SGD).  

The portfolio's best-performing holding was Chinese airport operator Beijing Airport (+19%), which owns and operates Beijing’s primary airport under a 50-year concession extending to 2056. The company issued a positive profit alert for the first half of 2026, supported by disciplined cost management and higher international passenger volumes. Chinese gas utility ENN Energy (+16%), which supplies natural gas to residential, commercial, and industrial customers throughout China, also outperformed. Investors shrugged off concerns about lacklustre demand and higher input costs, focusing instead on the company’s appealing valuation multiples and >6% dividend yield. China Tower (+14%), which owns and operates more than two million mobile towers, rebounded on the view that it had traded down to oversold levels. These three stocks also benefitted from strength in the broader H-share market, which ended the month almost 15% higher in USD terms.

Japanese transport infrastructure stocks represented another area of strength for the portfolio. Japan Airport Terminal (+12%), which owns and operates the terminals at Tokyo's Haneda Airport, was buoyed by renewed market focus on the potential of its capital management initiatives. Current yen weakness, which enhances the purchasing power of overseas visitors, should also be supportive of duty-free sales. West Japan Railway (+10%), whose network serves the Kansai region, including Osaka and Kyoto, gained as investors focused on its defensive earnings profile and attractive valuation.

Strong June quarter earnings saw North American freight rail operators build on already robust year to date gains. Union Pacific (+7%) reported better-than-expected Earnings Per Share (EPS) growth of 13%, driven by healthy volumes, robust pricing, and improved operating metrics, including higher average train speed and lower terminal dwell time. Lower headcount and higher haulage volumes helped CSX Corp (+6%) deliver record revenue and EPS, while Canadian National Railway (+5%) also reported earnings ahead of market consensus, supported by strong pricing power. During the month, Union Pacific and Canadian National signed a memorandum of understanding (MOU). Under the agreement, Canadian National will withdraw its opposition to Union Pacific’s proposed acquisition of peer Norfolk Southern (+7%, not held) – which remains under regulatory review – in exchange for favourable route and operating rights, including access to Mexico’s rail network.

The portfolio's worst-performing holding was Mexican airport operator GAP (-15%), which declined along with peers ASUR (-10%, not held) and OMAB (-7%, not held). Mexico’s airport traffic numbers for June disappointed, in the absence of an anticipated boost to inbound traffic from the FIFA World Cup (co-hosted by Canada, Mexico and the United States). Weaker-than-expected June quarter earnings represented an additional headwind. Swiss operator Flughafen Zurich (-5%) also underperformed as a deteriorating situation in the Middle East weighed on sentiment towards the stock. French peer Groupe ADP (+5%) held up better on news of favourable developments for the Economic Regulation Agreement (ERA) regulatory framework which will govern the company’s investment program between 2027 and 2034.

Regulated US utilities also lost ground during the month amid concerns that increased regulatory scrutiny of new data centre developments, including the allocation of associated grid infrastructure costs, could slow the pace of activity. This could in turn have implications for some utilities’ capex and rate base growth forecasts. American Electric Power (-7%) and Evergy (-4%), which have substantial capex plans partly based on meeting accelerating electricity demand from industrial customers in their Midwest and Texas-focused service territories, gave up ground. Similar concerns held back Public Service Enterprise Group (-5%) and Xcel Energy (-3%). Rising bond yields represented an additional headwind for these interest rate-sensitive stocks.

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.

UK water utility United Utilities was sold on increasing political risk concerns. Britain’s new Labour Prime Minister has previously called for “greater public control” of highly indebted, privately owned water utility Thames Water. While we do not expect listed water utilities to be directly affected, developments on this front could impact investor sentiment towards the sector. 

Australian-listed toll road operator Atlas Arteria was divested after unlisted infrastructure asset manager IFM Investors secured effective control of the company through its off-market takeover offer, raising concerns for future liquidity and dividend policy.     

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 are responding to concerns about the potential impact on customer bills, we believe the long-term opportunity for utilities remains substantial. US utilities are also seeking to address these concerns through measures such as large-load tariffs – specialised pricing structures designed for high-capacity users.

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. Consolidation activity within the telecom sector (mobile towers’ primary customer base) has raised concerns about tenant churn rates; however, longer-term growth drivers remain.

Airports appear 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. While sentiment towards the sector has been affected by the ongoing conflict between the US and Iran, we believe the magnitude of the earnings impact is likely to be less severe than current market pricing implies. 

Source: Company data, First Sentier Investors, as of 31 July 2026.