Listed infrastructure stocks hit by short-term market moves
![infrastructure image](https://moneymanagement-live.s3-ap-southeast-2.amazonaws.com/s3fs-public/field/image/infrastructure%20003-300.jpg)
![infrastructure image](https://moneymanagement-live.s3-ap-southeast-2.amazonaws.com/s3fs-public/field/image/infrastructure%20003-300.jpg)
The rising interest rate environment is not correlated with lower returns for infrastructure stocks and market overreaction causes short-term underperformance of global listed infrastructure stocks, AMP Capital’s study said.
According to the report titled “Not just a bond proxy” global listed infrastructure was not a bond proxy anymore as sovereign yields rose around the world and the market overreaction led to short-term underperformance of global listed infrastructure stocks compared to global equities.
AMP Capital’s head of global listed infrastructure, Giuseppe Corona, noted that each meaningful increase in sovereign yields since the global financial crisis (GFC) saw global listed infrastructure underperform global equities on a short-term basis before recovering the underperformance within the next 12 months.
“What this shows is a market overreaction to a rising yields environment,” he said.
“A strong correlation between the performance of global listed infrastructure and its cashflow growth shows investors should focus on the underlying assets and their ability to generate visible and growing cashflows, and not be spooked by the dramatics of short-term market moves.”
According to him, investors should also consider the influence of rising yields in the context of listed infrastructure’s sector diversification as some sectors such as utilities, communication, transportation and oil and gas storage transportation were affected by changes to interest rates in different ways.
“Investors should always focus on the underlying assets and their ability to generate visible and growing cashflows because of the strong correlation between the long-term performance of the asset class and its cashflow growth,” Corona said.
Recommended for you
Australian and New Zealand sustainable funds saw outflows of more than $1.2 billion in the second quarter of 2024, according to Morningstar, with active strategies accounting for the majority.
Maple-Brown Abbott has finalised an agreement to be acquired by a rival fund manager to create a firm with $18.6 billion in assets under management, just two months after its former CEO exited to lead Magellan.
Following a strategic review, Platinum has announced it will merge its two listed investment companies with two of its quoted managed hedge funds.
With potential US interest rate cuts on the horizon, Income Asset Management believes now is an ideal time to be investing into the corporate bond market.