Study: Asian Infrastructure Increasingly Attractive

(June 20, 2011) — J.P. Morgan Asset Management (JPMAM) believes that Asian infrastructure represents an increasingly attractive opportunity as the region experiences stronger demand for electricity, roads, railways, and phone lines.

“Asian infrastructure is becoming increasingly attractive as a proxy for capturing the longer-term growth outlook of the various Asian economies in light of inflation and rate rises,” commented Vijay Pattabhiraman, Chief Investment Officer for Asian Infrastructure in the Global Real Assets Group of J.P. Morgan Asset Management, noting that urbanisation, the expansion of a wealthier middle class, and increasing domestic consumption have been the key drivers of Asia’s strong growth trends.

Pattabhiraman added: “The increased demand for infrastructure which follows years of underinvestment has created a situation where supply is unable to keep pace with demand. Emerging Asia’s large economies, such as China and India, are significantly behind their more developed peers in the west, which we view as a tremendous opportunity in the upcoming years.”

Coal-fired power is in a stage of rapid expansion in Asia, JPMAM explained. Five of India’s largest private power developers are currently in various stages of developing 40+ gigawatts of new thermal-fired power stations, which is expected to create a drain on the country’s internal resources. As a result of the growth of coal-fired power in India, the country may be forced to import coal from Indonesia, the world’s largest thermal coal exporter with an economic output increasing at around 5% annually.

The report concluded by saying, “It is evident Asia is growing and infrastructure is central to its development. While, immediate impacts such as rates rises and inflation are increasingly a concern for some investors we believe infrastructure investing is capturing the long-term growth outlook.”