Infrastructure spending in emerging markets could exceed $1 trillion in the next three years, up from its previous estimate of $705 billion, on higher spending forecasts for China and the emergence of new sources of spending in Russia and in the Middle East, Merrill Lynch said in a report Monday.
"(Emerging market) equity prices are responding positively to the theme," Merrill said, adding that its infrastructure basket of stocks is up 38% year-to-date.
Merrill picked a list of 50 stocks from developed and emerging markets on which to play the infrastructure theme, it said. The list includes India’s Bharat Heavy Electricals Ltd. (500103.BY), Egypt’s Orascom Construction Industries, Cemex SA and homebuilders Consorcio Ara and Corporacion Geo, and Brazil’s power utility CPFL Energia and toll-road operator Companhia de Concessoes Rodoviarias, or CCR.
Drivers for such spending include "the pressing need for quality upgrades to reduce inflation bottlenecks and urbanization pressures," Merrill Lynch said in the report.