How to invest in three hot emerging-market sectors in India and Brazil

by Dave

Developing countries are expected over the next three years to spend more than 100 times what the U.S. might spend over six. Almost $4 trillion of this estimated $6.3 trillion outlay is linked to China, but major commitments also are coming from governments and private sources in Brazil, India, Russia, Mexico, South Africa and the Middle East.

Investing in emerging markets’ building boom

Companies that build or maintain infrastructure — roads, bridges and more — in China, Brazil and other emerging markets are set to gain in coming years. Aaron Visse of the Forward Global Infrastructure Fund talks with MarketWatch’s Jonathan Burton.

To be competitive in the global marketplace, stoke economic growth, and keep exploding populations from becoming explosive, emerging markets have no choice but to spend and build, on everything from ports to power plants.

Rewards, and risks

Economic stability is not the only purpose for infrastructure spending; there’s a strong political motive as well. Domestic infrastructure projects create skilled jobs and improve people’s quality of life. People everywhere want clean water, working sanitation, and reliable power and transportation.

Infrastructure spending across the emerging markets is still robust, though private enterprise is expected to cover more costs and liabilities going forward, particularly in Brazil and India.

Brazil, notably, is hosting soccer’s World Cup in 2014 and the Olympics in 2016 — two events that require a functional infrastructure.

Emerging markets nowadays also have access to capital to make these investments happen, unlike a decade or so ago when they were considered low-quality, high-risk backwaters. These countries are in sound financial shape, and not as leveraged as mature North America, Europe and Japan.

“It’s a better story at a lower price,” he said of the developing countries. “If the global growth story improves, emerging markets keep outperforming. If it’s murky, they still continue to outperform because their story is less murky.”

The best way for investors to succeed is to focus on three of the hottest infrastructure sectors in emerging markets: energy and power; transportation and logistics, and water and the environment.