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Lofty skyscrapers are sprouting out of the earth almost everyday in emerging Asia and investment funds are hoping to fill the gap created by Indian and Chinese developers dearth of funds. Just recently, JP Morgan and AMP Capital Investors, announced infrastructure investment funds of US$1 billion and US$810 million respectively. Primary markets for these funds are cities in India and China, with a secondary focus on South Korea, Singapore and Hong Kong.
Across emerging markets (EM), a boom in infrastructure building is underway. In power and water, property, ports and airports and beyond, emerging markets governments and private sector players are deploying unprecedented amounts of capital to upgrade the emerging world. We forecast a total of US$21.7 trillion in infrastructure spending in EM over the next decade, with Asia representing 67% of this total (China expected to make up 43% of spending and India 13%), Morgan Stanley mentioned in a recent report on Emerging Markets Infrastructure.
Private funding in conventional project finance form as well as innovative dedicated infrastructure funds are heavily engaged. A surge in market listings of owners, operators and contractors to build EM infrastructure assets, is also underway. On our estimates, the number of listed EM infrastructure-related entities has risen from 230 to 354 (54% increase) over the last five years—with total market capitalization increasing from US$146 billion to US$1.1 trillion.
“It’s a fantastic opportunity for us at a time when a lot of our competitors are scaling down because of difficulties accessing their balance sheet,” JP Morgan’s Asia real estate head, Bryan Southergill, told Reuters in an interview.
Many Chinese and Indian developers are struggling to complete ambitious projects because local banks have clamped down on lending to the construction industry and a stock market slump has closed off equity raising through initial public offerings.
Foreign investors are also shying away from markets where risks, as well as returns, are traditionally high. But because of a shortage of funds, developers are starting to offer plum deals.
