Building Asia-Pacific’s Future

Investing in Infrastructure

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INTRODUCTION

No matter how the trade landscape evolves, it has become clear that many economies in Asia-Pacific are emerging as beneficiaries from a global realignment in supply chains. To support burgeoning trade relationships and broader economic growth, significant investments across the region’s infrastructure space—spanning transportation, housing, data centers, manufacturing, and logistics—will be required.

Global infrastructure AUM stood at

$325B

in 2016 and is forecast to hit $1.7T by 2028

By taking a broad view of infrastructure as an asset class, investors can unearth diverse opportunities that emerge in the next chapter of global trade. There are four underlying themes to consider when assessing the infrastructure landscape in Asia-Pacific:

  1. Asia-Pacific countries have unique infrastructure needs and challenges.
  2. Four Ds are driving major change: demographics, deglobalization, digitization and decarbonization.
  3. Infrastructure financing flows through both public and private markets.
  4. Digital infrastructure is a fast-growing sector in Asia-Pacific, driven by AI and the cloud.

Rapid growth in and around state capitals will require a variety of infrastructure improvement programs.

• The living sector—including student housing, nursing homes and co-living—is rife with potential amid an affordability crisis.

• The investment case for logistics appears strong as populations and e-commerce demand grow in tandem, driving companies to seek new warehouses that can serve major cities.

• The supply-demand imbalance in data centers is most pronounced in developed markets such as Australia, where land constraints in places like Sydney make rents favorable to investors.

Panorama of Sydney harbour and bridge in Sydney city

The transformation of global trade and an aging workforce are central to the infrastructure outlook.

• Labor shortages and new overtime rules for truck drivers have become major considerations in the location of new builds, as well as the conversion of older infrastructure, as companies seek modernized logistics facilities capable of implementing automation.

• Major tech companies have pledged to invest billions of dollars in Japan to expand AI and cloud infrastructure, supporting a positive outlook for data centers.

• Japan’s real estate market is an appealing investment destination amid healthy yield spreads, market stability, and still-low interest rates.

Tokyo city at sunset

Shifting trade patterns, the digitization of the global economy, and the quest for reliable chip production are central themes.

• Countries with an established factory sector and existing trade ties with the West are well positioned to capitalize on the fragmentation of the global economy.

• Data center growth is strong in up-and-coming markets like Malaysia amid supply constraints in Singapore, which remains a major hyperscale market that offers attractive rents for investors.

• Urban population growth in major cities such as Singapore is increasing demand for rental housing to address supply shortages and affordability challenges.

Singapore at Night

Urbanization, electrification, and increased manufacturing activity are part of India’s growth story.

• Electrical buildout, the need for better roads and airports, and an improved rail network will all be part of the infrastructure push that will be paramount in helping India achieve its lofty economic goals.

• Infrastructure opportunities should arise from an increase in air traffic and tourism. For such a large country, the penetration rate for flying remains small.

• Many industrial companies anticipate strong growth, and expanding manufacturing capacity will no doubt lead to a corresponding surge in power demand and related infrastructure needs.

Mumbai cityscape turning purple at dusk.
format_quote

The realignment of global supply chains creates a void to be filled. In Asia-Pacific, investors have to be nimble as new infrastructure needs emerge.

Magdalena Polan,Head of Emerging Market Macroeconomic Research, PGIM Fixed Income

<p>The realignment of global supply chains creates a void to be filled. In Asia-Pacific, investors have to be nimble as new infrastructure needs emerge.</p>

PGIM'S INVESTMENT STRATEGIES

PGIM offers clients diversified solutions with global depth and scale across public and private asset classes, including fixed income, equities, real estate, private credit and other alternatives. Strategies that have a significant focus on infrastructure include:

Global Infrastructure – Listed Equities

Jennison’s Global Infrastructure Strategy invests in a diversified portfolio of high-quality listed infrastructure companies that exhibit above-average levels of free cash-flow growth and whose fundamentals are underappreciated by the market. Jennison has been investing in infrastructure companies for over 15 years and is a pioneer in utility investing, managing one of the largest utility strategies in the US since the 1990s.

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REAL ESTATE – DATA CENTERS

In 2023, PGIM Real Estate launched its data center strategy, investing primarily in hyperscale global data centers worldwide. PGIM Real Estate has invested in data centers with a total value of over $900 million completed in partnerships with leading data center operators, including Equinix.

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CARBON SOLUTIONS

Jennison’s Carbon Solutions takes a differentiated, comprehensive alpha-based approach to decarbonisation with a concentrated portfolio of 45-65 companies. With a global, all-cap multi-sector universe, the strategy seeks to invest across a broad range of companies, particularly where the contribution to decarbonisation and likely future growth are being underestimated.

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Global Infrastructure Debt

PGIM Private Capital manages infrastructure-focused strategies for institutional investors. The strategies invest in investment-grade and below investment-grade private debt in infrastructure sectors including renewable energy, power generation and transmission, midstream energy and transportation, social and digital infrastructure worldwide, as well as a range of other real assets concerns.

Opportunities in Emerging Markets

Investor interest in Emerging Markets continues to grow rapidly, not surprising given the sheer size and economic growth potential.

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