With global growth faltering, countries may bolster spending on infrastructure projects to stimulate their economies, and investors can capitalize on the expansion through sector-related exchange traded funds.
According to the International Monetary Fund, global economies have been weighed down by the effects of the financial downturn and will likely continue to feel its effects for years to come, reports Anna Yukhananov for Reuters.
However, the IMF is urging countries, notably rich economies, to support demand and investment through infrastructure development. Additionally, the Fund is also advising emerging markets to lift infrastructure spending as well.
“Firms have reacted to weak sales — both current and prospective — by reducing capital spending,” according to the IMF, Bloomberg reports. “A comprehensive policy effort to expand output would contribute to a sustained rise in private investment.”
If countries turn to infrastructure projects as an easy way to stimulate economic output, investors should consider infrastructure funds to capitalize on the increased spending. For instance, ETF investors can take a broad approach to emerging market infrastructure names through the iShares S&P Emerging Markets Infrastructure Index Fund (NYSEArca: EMIF) or PowerShares Global Emerging Markets Infrastructure Portfolio (NYSEArca: PXR).
Both emerging market infrastructure funds include heavy tilts toward China. EMIF holds 36.4% China, followed by Brazil 18.6% and Mexico 8.6%, while PXR includes China 35%, followed by Taiwan 12.3% and South Africa 5.5%.
The heavy China exposure may be a boon as the government is committed to a massive infrastructure project to build a modern Silk Road to Europe and Africa. [China ETFs Stimulated by Stimulus, Infrastructure Spending]
For more targeted emerging market infrastructure exposure, Emerging Global Advisors offers a couple of options, including the EGShares Brazil Infrastructure Index Fund (NYSEArca: BRXX) and EGShares India Infrastructure ETF (NYSEArca: INXX).
Alternatively, investors can take a more conservative play with the broader global infrastructure ETFs as developed countries also need to update their aging infrastructures. The e FlexShares STOXX Global Broad Infrastructure Index Fund (NYSEArca: NFRA) has 93.3% in developed market exposure, iShares Global Infrastructure ETF (NYSEArca: IGF) holds 90.5%, SPDR FTSE/Macquarie Global Infrastructure (NYSEArca: GII) includes 90.5% and ProShares DJ Brookfield Global Infrastructure ETF (NYSEArca: TOLZ) has 96.4%.
For more information on the infrastructure sector, visit our infrastructure category.
Max Chen contributed to this article.