• HOME
  • INVESTMENTS
    • Equities >
      • Australia All Cap
      • Australia Small Cap Income
      • Global Mobility
      • Global High Conviction
    • Property >
      • Listed Property
      • TAMIM Property
    • Income >
      • Credit
  • INSIGHTS
    • Insights
    • Weekly Reading Lists
  • ABOUT
  • CONTACT
Tamim Asset Management
  • HOME
  • INVESTMENTS
    • Equities >
      • Australia All Cap
      • Australia Small Cap Income
      • Global Mobility
      • Global High Conviction
    • Property >
      • Listed Property
      • TAMIM Property
    • Income >
      • Credit
  • INSIGHTS
    • Insights
    • Weekly Reading Lists
  • ABOUT
  • CONTACT

Market Insights

Thematic: Global Infrastructure Spending Emerging As The Focus

8/7/2020

0 Comments

 
Karl Hunt, of the Global High Conviction portfolio and Delft Partners, delves into what is shaping up to be one of the stronger global investing thematics. Infrastructure spending was needed prior to the ongoing pandemic and it is now likely to accelerate as governments around the world look to drive economic activity.
Picture
As countries emerge from covid lockdown we will start to receive lots of news from companies, surveys, economic data, etc. Much of it will be confusing and conflicting. We will need to be careful in not jumping to hasty conclusions. There has been no business for three months in lots of product categories so we will inevitably see some initial pent-up demand as businesses re-open which may superficially sound good, only to slump to much lower than average levels in later months.

Unless a vaccine is rolled out in the near term many areas of business will struggle to operate at anywhere near pre covid levels – travel, leisure, retail, certain manufacturers, etc. A lot of workers are still furloughed, but as these schemes come to an end (governments simply can’t afford to run them for too long), so companies will face crunch decisions as to whether they take workers back or make them redundant. 

As we have said from the start of the crisis, we remain of the opinion that after the initial spike in business resumption, the recovery is likely to be gradual and unemployment to remain higher for some time. We have seen a strong rebound from the bottom in stockmarkets, but we should be cautious about reading too much into the move. A lot of trading is technically driven – hedge funds opening or closing short positions on stocks can create significant rallies in stocks. We think some of the cyclical, most covid affected areas of the market have moved up too much.

Most governments have moved quickly to put in place measures to maintain the productive capacity of their economies – providing liquidity to companies, furlough schemes for workers, etc. However, this still does not make up for lost demand and GDP levels are likely to be below 2019 levels for some years. So, governments are going to need to do more to stimulate demand or be the demand itself.

One area that governments have underspent for decades in many countries is infrastructure. Anybody who has been to China will have seen how far behind much of the developed western world is in terms of infrastructure. Infrastructure is a broad set of industries that include electricity (renewable energy increasingly required by new legislation), water, communication networks, road, rail, airports, oil supply and transportation, port facilities, storage, etc. The economics consultancy firm, Oxford Economics, in a large global study in 2017 estimated that the world needed to spend approximately US$94tn to 2040 with Asia and the Americas requiring the biggest expenditure. Failure to invest in Infrastructure impedes economic growth – in places like India electricity supply can often be unreliable; transportation bottlenecks cause delays and raise costs; dirty energy causes pollution and health risks, etc.
​
Covid has been a tragic human and economic event for the world. It has left a big hole in the global economy. So, this would provide an opportune time for governments around the world to fill the hole with much needed spending on crumbling infrastructure where underinvestment has occurred for decades. Fortunately, bond yields for most developed economies are very low, so funding is cheap.

Government Bond Yields
​The Trump administration announced a plan to spend US$1tn on infrastructure on 15 June and more details are likely to be announced in July and it is likely to focus on roads and bridges. The main drawback with infrastructure spending is that they take time to plan and implement when the economy needs an instant injection of demand.
Current Infrastructure spend trends vs needed
Source: Oxford Economics 2017
The Oxford Economics study showed that the greatest need for more spending compared to trend was electricity (both in capacity and cleaner energy) and roads in terms of sectors. Geographically all regions needed greater spending with Africa and the Americas needing most.

We believe global infrastructure is an attractive investment space particularly in the current climate of uncertainty. Many companies have significantly cut their dividend payments or suspended them entirely. This could well turn out to be one of the biggest “dividend recessions” in history and it may well take many years before global dividend levels get back to 2019 levels. Infrastructure companies like utilities, road & rail franchises, etc tend to have above average and more stable dividend payments. Decent income yields have been in demand ever since bank interest rates plummeted and the relative scarcity in the current climate will make infrastructure stocks very attractive. Our own Global Infrastructure portfolio currently yields 4.5% and this is set to grow by over 5% per annum on current forecasts.
0 Comments

Your comment will be posted after it is approved.


Leave a Reply.

    Markets & Commentary

    At TAMIM we are committed to educating investors on how best to manage their retirement futures.

    Sign up to receive our weekly newsletter:

    * indicates required

    TAMIM Asset Management provides general information to help you understand our investment approach. Any financial information we provide is not advice, has not considered your personal circumstances and may not be suitable for you.

    Archives

    May 2022
    April 2022
    March 2022
    February 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    July 2016
    June 2016
    March 2016
    February 2016
    January 2016
    December 2015

    Categories

    All
    Accounting
    AGM
    Amazon
    APRA
    Asia Small Cap
    Asset Allocation
    Aus Equity All Cap Value Portfolio
    Aus Equity Income Portfolio
    Aus Equity Small Cap Portfolio
    Australian Banks
    Australian Market Commentary
    Banking Royal Commission
    Big 4 Banks
    BNPL
    Brexit
    Budget
    China
    Corporate Governance
    Correlation
    Cryptocurrency
    Currency
    Darren Katz
    Dividend Yields
    Election
    Emerging Markets
    Energy
    GDP
    Global Equity High Conviction Portfolio
    Global Mobility
    Gold
    Guy-carson
    Housing
    Income Investing
    Inflation
    Infrastructure
    Insurance
    Interest Rates
    International Commentary
    Investment Thematics
    Investor Psychology
    Israel
    Japan
    Katz's Corner
    Kevin Smith
    Market Outlook
    Mergers-aquisitions
    Mobility
    Oil
    Passive-vs-active
    Peer-to-peer-lending
    Peertopeer-lending
    Portfolio Management
    Portfolio-management
    Private Debt
    Property
    Rando's Reflections
    RBA
    REITs
    Reporting Season
    Retail
    Risk Management
    Robert Swift
    Ron Shamgar
    Small Cap Income Portfolio
    Small Caps
    Succesion Planning
    Telecoms
    The Pain Report
    Trade War
    Trump
    Value Investing
    Video
    ZIRP

    RSS Feed

TAMIM | Equities | Property | Credit
​

TAMIM Fund
Australia All Cap
Australia Small Cap Income
Global Mobility
Global High Conviction
Credit

Listed Property
TAMIM Property
Company
About
Contact
Insights
Invest Online
Login
Other
Privacy Policy
Terms & 
Conditions
​Disclaimer
Contact
Level 4, 55 Grafton Street
Bondi Junction, Sydney NSW, 2022

1300 750 007

ima@tamim.com.au

DISCLAIMER

​The information provided on this website should not be considered financial or investment advice and is general information intended only for wholesale clients ( as defined in the Corporations Act). If you are not a wholesale client, you should exit the website. The content has been prepared without taking into account your personal objectives, financial situations or needs. You should seek personal financial advice before making any financial or investment decisions. Where the website refers to a particular financial product, you should obtain a copy of the relevant product services guide or offer document for wholesale investors before making any decision in relation to the product. Investment returns are not guaranteed as all investments carry some risk. The value of an investment may rise or fall with the changes in the market. Past performance is no guarantee of future performance. This statement relates to any claims made regarding past performance of any Tamim (or associated companies) products. Tamim does not guarantee the accuracy of any information in this website, including information provided by third parties. Information can change without notice and Tamim will endeavour to update this website as soon as practicable after changes. Tamim Funds Management Pty Limited and CTSP Funds Management Pty Ltd trading as Tamim Asset Management and its related entities do not accept responsibility for any inaccuracy or any actions taken in reliance upon this advice. All information provided on this website is correct at the time of writing and is subject to change due to changes in legislation. Please contact Tamim if you wish to confirm the currency of any information on the website.  

magellen, kosec, clime, wilson, wam, montgomery, platinum, commsec, caledonia, pengana, tamim

  • HOME
  • INVESTMENTS
    • Equities >
      • Australia All Cap
      • Australia Small Cap Income
      • Global Mobility
      • Global High Conviction
    • Property >
      • Listed Property
      • TAMIM Property
    • Income >
      • Credit
  • INSIGHTS
    • Insights
    • Weekly Reading Lists
  • ABOUT
  • CONTACT