The Atlas Arteria Group (ASX: ALX) share price is backing further away from its record high of $8.19 it hit last month after Macquarie Group (ASX: MQG) sold down its shareholdings and stopped being a substantial shareholder in the toll road operator.
The Atlas Arteria share price slumped 1% to $7.66 when the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index is down 0.4%, although the ALX share price is still up nearly 18% over the past year when the broader market is sitting on a 7% gain.
The fact that Macquarie is no longer “substantial” (meaning its holdings have fallen below 5%) in Atlas Arteria is noteworthy given that the company started life being called Macquarie Atlas Roads Group before the global financial crisis (GFC) with Macquarie Group acting as the responsible entity (RE) for the infrastructure fund.
The Macquarie Group connection
It then changed its name to Atlas Arteria after it was decided shareholders would be better off if it managed its own affairs. Listed vehicles that are externally managed was all the rage prior to the GFC but that model fell out of favour due to concerns about conflicts of interests between shareholders of the vehicle and the RE.
It’s understandable how the loss of Macquarie as a major shareholder could weigh on sentiment but the outlook for infrastructure stocks appears to be reasonably bright given this falling interest rate environment.
The Reserve Bank of Australia (RBA) is tipped to lower the official cash rate by another 25 basis points to 0.75% before the year is out after it made two back-to-back rate cuts in June and July.
The US Federal Reserve is also poised to cut rates and there’s speculation that it will need to make more than one cut to keep the world’s largest economy humming along in the face of a trade war with China.
Not time to be giving up on bond proxies
This in turn is driving down government bond yields and that is a positive for “bond proxies” – or shares that behave like bonds. Infrastructure and utility stocks are the quintessential bond proxies and that bodes well for Atlas Arteria, which owns three toll roads in Europe and one in the US.
Atlas Arteria isn’t the only infrastructure stock that will benefit from low bond yields of course. The Transurban Group (ASX: TCL) share price and Sydney Airport Holdings Pty Ltd (ASX: SYD) share price are also being supported by falling yields, which make their dividends look more attractive.
However, Atlas Arteria is a rare beast in the infrastructure space as it offers overseas exposure directly from the ASX.
A stock like Atlas Arteria will become more enticing compared to its peers if you believe that the Australian dollar will remain weak against the greenback and is at risk of ceding ground against the Euro.
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The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited, Sydney Airport Holdings Limited, and Transurban Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.