By Carl Delfeld of Chartwell ETF
With a global slowdown crashing down upon us, this may not seem to be the best time to invest in infrastructure or emerging markets but I believe this sector will lead the recovery. This investment theme is tied to two unmistakable trends: the urbanization and infrastructure gap in emerging nations.
In 1975 there were only three cities in the world of over 10 million. In 2008, there are 20 cities of which 15 are in emerging markets. China alone has over 100 cities with a population exceeding 1 million. Along with this urbanization has come stronger economic growth and expanded international trade.
This means that unless these countries build more airports, roads, railways, seaports, and pipelines, they will literally choke on their growth. Morgan Stanley predicts that $22 trillion will be spent on these projects over the next decade. This also include communications infrastructure like mobile telecommunications and cable providers.
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Here are some interesting facts that highlight the infrastructure opportunity.
- Only 5% of Brazil’s roads are paved
- Canada recently launched a $33 billion infrastructure plan
- China is planning to build 97 regional airports by 2020
- The top 20 container terminals have seen growth of 42% during the past three years
- Mumbai has an astounding 18,424 people per square mile (New York has 1,274)
- South Africa is 4th fastest mobile phone market in the world
- Mexico City will soon pass a population of 20 million
- China is spending 10% of its GDP on infrastructure a year
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