Where we’re bullish on Asian infrastructure (and where we're not)

This is the 18th edition of our Trip Insights series, where we share our travel experiences and on-the-ground perspectives from our company meetings and regional visits. It follows a recent research trip by our Senior Investment Analyst, Chris James and myself through Malaysia, Thailand, Hong Kong, China, the Philippines, and Indonesia. 

During the trip, we met with management teams from regulated utilities, communications, and transport companies. Observations across the region were mixed.

The region’s long-term structural thematics remain firmly intact with the listed infrastructure asset class benefiting from enduring secular tailwinds, including favourable demographic trends, a rising middle class, ongoing urbanization, the energy transition, and accelerating digitization. 

As always stock selection remains key as the array of opportunities come with increasing risk as a result of domestic politics, geopolitical tensions, and evolving economic policies and trade.

This piece outlines the key themes and takeaways from the trip, and how these have shifted our investment strategy across the region.

Politics

Trump

As we commenced this trip, President Trump announced his ‘Liberation Day’ tariffs. The announced tariffs were far more aggressive than most bear cases, no region was more impacted than Asia and in particular Emerging Asia. As such, it was an interesting time to be travelling through the region.

Immediate concern gave way to wary optimism as Trump paused implementation awaiting trade negotiations. However, the tariff level and impact to the in-region economies remained and remains a core overhang. As such, we look to prioritise investment opportunities in countries, sectors and companies that have relatively resilient fundamentals and/or are more immune to the impact of tariffs.

The question was posed to all companies regarding the impact of these tariffs, aiming to assess their effects on operations, earnings, and supply chain management. The direct and indirect impacts vary by sector, regional exposure, and pre-emptive mitigation strategies. While global trade faces significant challenges, it is not disappearing; rather, it is transforming.

We recently published an article News & Views: Are we there yet?! Assessing Trump’s tariff policies, the impact on the economy and global listed infrastructure. As such we will not go into detail on this theme here except as it directly impacted corporate-level discussions.

Malaysia

Malaysia’s domestic landscape feels relatively stable under Prime Minister Anwar Ibrahim’s unity government. The 2023 state elections maintained the status quo, with Anwar’s coalition holding key states, although the opposition Perikatan Nasional (PN) made notable inroads in Malay-majority areas, highlighting a polarized electorate. We did not observe any domestic political unrest or disharmony with the heightened tension with the US the key near term concern for domestic politics.

Malaysia is still viewed as a potential ‘China +1’ beneficiary, but progress remains slow amid uncertainty over a cohesive national strategy. Public sentiment remains cautiously optimistic, underpinned by ongoing reforms and efforts to strengthen regional economic ties, including the expected finalization of the ASEAN-China free trade agreement. Further, in an effort to attract foreign investment, the government introduced Budget 2025, which includes tax incentives for high-value sectors and, notably, infrastructure development. However, competition from regional peers and persistent bureaucratic hurdles continue to weigh on investor confidence, limiting the near-term upside of the policy.

The weakening ringgit continues to be an overhang and while there is speculation about potential capital controls, no concrete policy action has been taken.

Thailand

Thailand continues to face underlying political tension following the 2023 election, in which the progressive Move Forward Party (MFP) was prevented from forming a government despite winning the popular vote. In August 2024 the Constitutional Court dissolved the MFP and banned its leaders from politics for a decade, citing their push to reform the lèse-majesté law - a major blow to progressive politics. Pheu Thai, led by Paetongtarn Shinawatra, subsequently formed a coalition government with conservative and military-aligned parties, a strategic reinforcing of existing power structures and deepening concerns over democratic backsliding.

While political uncertainty and bureaucratic inertia continue to weigh on foreign investment public sentiment remains relatively calm, supported by a steady post-COVID tourism recovery. However, a major concern for us post this trip was the increased government intervention across key sectors, particularly where cost-of-living pressures or an economic recovery agenda have driven short-term populist policies. 

We observed damaging policies enforced upon the Airport, Expressway, Rail, and Utilities sectors, which have not only eroded company earnings but could also reshape the structure of concessions and contracts in certain sectors going forward. This was a key negative from this trip and the current political overhang sees us question Thailand as an investment destination over the near term.

Hong Kong/China

Hong Kong continues to operate as a hybrid jurisdiction, functionally distinct yet politically aligned with Beijing. While the mainland’s presence remains influential, it has become more institutionalised and less visible in day-to-day affairs. It felt like the post-COVID business environment has stabilised, supported by resumed cross-border activity and an influx of high-net-worth mainland Chinese residents, which is reshaping demand in property, retail, and education. The expatriate outflow has slowed, but the city’s demographic and economic profile continues to evolve.

On the mainland, confidence remains fragile amid regulatory unpredictability and ongoing geopolitical tensions. However, targeted policy support for strategic sectors—particularly AI, green tech, and advanced manufacturing—is creating pockets of opportunity. The feel on the ground had definitely taken a further step forward from our trip in 2024 with increased confidence that structural government stimulus would be used to stabilise the outlook.

Infrastructure remains a bright spot across both Hong Kong and China, buoyed by Greater Bay Area integration and a renewed push into transport, logistics, and clean energy. These investments offer clearer visibility and long-duration potential for long-term capital, particularly where they align with national priorities.

Philippines

The Philippines continues to navigate a complex political landscape, marked by deepening divisions within its leadership. In the 2022 presidential election, Ferdinand Marcos Jr. won decisively with 58.8% of the vote, defeating Leni Robredo, who garnered 27.9%. However, the once-powerful alliance between the Marcos and Duterte families has fractured. Vice President Duterte now faces impeachment proceedings over allegations of corruption and threats against President Marcos, highlighting a significant rift between the two factions. 

The May 2025 general elections only further intensified political uncertainty. Typically, incumbent presidents in the Philippines secure most of their Senate picks during midterm elections; however, only six of the 12 winning senators are from the Marcos alliance. Notably, one of them, Camille Villar, also accepted endorsement from Sara Duterte, indicating a split allegiance. This outcome weakens the Marcos administration's authority in the remaining years of his term and casts doubt on the feasibility of impeaching Vice President Duterte, as a two-thirds Senate majority is required for conviction.

Indonesia

Following the 2024 election, Prabowo Subianto assumed the presidency with strong backing from outgoing President Joko Widodo, signalling broad policy continuity. While concerns remain over Prabowo’s military past, markets have responded positively to his emphasis on stability and growth.

He has set an ambitious target of achieving 8% annual GDP growth by 2029, up from the current rate of approximately 5%. To fund his administration’s expansive programs, some of which have drawn criticism over affordability and logistics, the government has introduced austerity measures totalling around US$19 billion, affecting sectors including education, health, infrastructure, and the public service. 

Notably, infrastructure spending has been cut sharply in 2025, with the Ministry of Public Works’ budget reduced by over 70% - a Rp81 trillion (approximately $5 billion) drop - leading to suspended toll road and maintenance projects and the furloughing of thousands of contract workers. This shift places greater importance on alternative financing models, particularly from the private sector, and highlights the need for stronger regulatory certainty to maintain momentum in infrastructure development.

A key structural reform is the launch of the sovereign wealth fund, Daya Anagata Nusantara (Danantara), which aims to consolidate and optimise state-owned assets to attract investment and build long-term resilience. While we remain cautious on issues of transparency and political influence, beyond the supervisory board, the managing, advisory, and steering committees are composed entirely of seasoned professionals from the private sector, both domestic and international, which suggests potential for more commercially driven outcomes. Danantara’s performance will serve as an early indicator of the administration’s commitment to institutional reform and could make or break this administration.

Infrastructure

While the Asian infrastructure landscape remains dynamic in 2025, key themes have emerged and evolved. Our latest observations highlight several interesting trends, including:

• Energy
• Airports
• Ports
• Transport
• Communications 

We touch on each of these in detail in the full article, which can be read here.

Tariffs

At the time of writing the scope and scale of the proposed tariffs have surprised markets and triggered immediate disruption to global shipping and trade activity. Port operators had largely anticipated that trade negotiations would remain focused on China, Canada, and Mexico. 

However, they were caught off guard by the announcement of a worldwide blanket 10% baseline tariff on all imports, alongside differentiated rates targeting specific countries. This broad-based strategy has introduced a new layer of uncertainty to global trade flows and container logistics, with far-reaching implications for pricing, routing, and demand. The impacts are multifaceted:

• Manufacturers are accelerating shipments or re-routing trade flows, pushing up short-term freight rates.
  
• Bonded warehouse capacity is increasingly stretched, as businesses rush to clear goods ahead of tariff implementation.
  
• Some shippers are delaying cargo movement, awaiting clearer policy guidance or clarity on potential retaliatory tariffs.
  
• Trade volumes are expected to enter a period of volatility and realignment, disrupting established shipping lanes and rate structures.
  
• These dynamics are likely to contribute to congestion, delays, and broader inefficiencies across the supply chain.

Portfolio positions

Despite ever-evolving political and economic headwinds across the globe, this trip sees us reaffirm our investment in the Asian region. We have factored in the risks and believe the value proposition of the quality infrastructure names continue to be very attractive.

In summary:

• Energy: A growing middle class, a global desire for a greener future and the increasing importance of technology in everyday life makes for a huge investment opportunity globally, including Asia. However, as investors we seek not only growth but reliable returns which limits the current regional investment universe to Malaysia where we are increasingly confident in the development of this sector in a shareholder-friendly way. By contrast, despite an improved regulatory outlook, we see increasing structural headwinds in the Chinese gas sector making it relatively less attractive than historically. Elsewhere we see ongoing regulatory hurdles across the region that need to be resolved before we would look to take a position.

• Airports: Asia is a driver of global air passenger growth seeing a structural need for increased airport capacity globally. Unfortunately, we do not see an attractive way to play this thematic in the region, but rather gain our exposure via destination airports in Europe and those Asian airports under European ownership (Vinci owns a global airport network including assets in Japan and Cambodia which are both benefiting from Asian tourism).

• Ports: Sentiment and uncertainty around tariffs and trade routes remains a significant headwind for the port sector in the near term. However, we were surprisingly positive on the fundamentals of the core operators we met with, particularly those prioritising diversity in gateway locations while structurally mitigating US exposure.

• Toll roads: The rise of the middle class remains a core theme across the region, and we believe toll roads are a fantastic way to capitalise on this evolution – both passenger and heavy vehicle travel momentum supported by a growing middle class and improving economic outlook. Further, the opportunity for more growth in the sector provides upside support – roads are core to economic evolution. We favour Indonesian toll road operator Jasa Marga and the Chinese operators exposed to the relatively resilient Tier 1 cities such as Shenzhen International and those operators capitalising on supportive regulatory change such as Jiangsu Expressway.

• Communications: Not all tower companies are created equal. While the opportunity set of 5G and data is universal, the framework and ability to execute is disparate. Within the Asian space we favour Mitratel in Indonesia who has the geographic footprint, asset quality, balance sheet, and strong management team to truly capitalise on the opportunity. However, we still see better relative tower value in other regions where MNO consolidation and spectrum issues are not a headwind.

• Yield: This trip again highlighted the importance of yield to the domestic investor, particularly in China. While we (like most investors) like yield, more important to our investment decision is fundamental value, total return, and quality.

• Thailand: A comment on Thailand as this trip highlighted the detriment of government intervention in the infrastructure sector at the expense of shareholder value. A clear take away was that we don’t see an opportunity to invest in Thailand under the current regime.

As always, we maintain a diversified portfolio of high-quality infrastructure names globally, and at the moment, believe parts of Asia are offering an attractive mix of quality and value while other areas are less attractive than has historically been the case.

To view the full paper, download the article here.