Asian infrastructure stocks may rise in coming months

Asian infrastructure stocks may rise in coming months

Bloomberg, San Francisco

Asian building and transportation companies maybe among the
region's best-performing stocks in coming months as governments
boost spending on infrastructure, such as roads and power plants.

PT United Tractors, an Indonesian maker of road-building
equipment, has climbed 31 percent in dollar terms this year, amid
a 1 percent gain in the Morgan Stanley Capital International
Asia-Pacific Index. Italian-Thai Development Pcl, Thailand's
largest construction company, has gained 33 percent.

Governments in Indonesia, Thailand and India in the past year
have said infrastructure spending is vital to spur economic
growth and vie with China for overseas investment.

The three plan to spend more than US$340 billion in the next
decade upgrading transport and power networks, in addition to
funds allocated to rebuild in the wake of the Dec. 26 tsunami.

"There's going to be some significant infrastructure
spending," said Eric Sandlund, who manages $650 million in Asian
investments outside Japan for Columbia Management Advisors in San
Francisco. Builders will benefit along with makers of cement and
heavy equipment and operators of toll roads, ports and airports,
he said.

Economic growth in Thailand, Indonesia and India has repaired
government finances, hurt by the 1997-1998 financial crisis in
Asia that forced them to cut spending and reduce debt.

Indonesia postponed 37 toll-road projects, according to a
report in April 2004 by the Asian Development Bank. The Manila-
based lender warned the country would face "an infrastructure
crisis" if it failed to boost investment.

India's economy may expand as much as 6.9 percent in the year
ending March 31, the Ministry of Statistics and Programme
Implementation said on Feb. 7. The Thai and Indonesian economies
may grow as much as 6 percent in 2005, according to forecasts by
the countries' respective central banks.

China increased infrastructure spending by 25 percent in 2003
to $325 billion, according to Chetan Ahya, an economist at Morgan
Stanley in Mumbai. The total, including real estate, was nine
times what India spent.

The outlays helped attract overseas investors. They pumped a
record $61 billion into China last year, a 14 percent increase
from 2003, government figures showed. India's government expects
its foreign direct investment to triple in the fiscal year ending
March 31 to $15 billion.

Indonesian government estimated the country must spend as much
as $150 billion in the next five years on infrastructure. The
government plans to spend $22 billion on 91 projects, such as
roads, rail lines and power plants, this year.

The Jakarta Construction, Property and Real Estate index has
risen 10 percent, more than double the 4.6 percent gain in the
broader benchmark.

United Tractors and Indonesian cement producers, such as PT
Indocement and PT Semen Gresik, may be among the stocks most
likely to benefit from the projects.

United Tractors "is a classic infrastructure play," said David
Robinson, a director at Prodigy Capital Partners LLP in London, a
hedge fund with about $75 million in Asian stocks. United
Tractors' shares rose 3.5 percent on Monday.

Indocement, the country's second-largest cement producer by
sales, expects to sell as much as 12 percent more cement this
year, according to Ria Sjahroni, corporate secretary. Last year,
sales rose 8 percent.

Last month, the government said it would need more than $4.5
billion to rebuild Nanggroe Aceh Darussalam and North Sumatra,
the provinces hardest hit by the tsunami.

In Thailand, Prime Minister Thaksin Shinawatra has pledged to
spend $39 billion on infrastructure projects in five years.

On Feb. 12, The Nation newspaper report, citing Thaksin and
other government officials, said that Thailand will spend 521
billion baht ($14 billion) in the next six years to expand
Bangkok's railroad system.

Siam Cement Pcl, Thailand's biggest producer, expects local
demand to rise more than a minimum 8 percent forecast, Executive
Vice President Kan Trakulhoon said on Feb. 2.

In India, Prime Minister Manmohan Singh's government budgeted
$13 billion in the current financial year for building roads,
railways, ports, airports and phone networks. The outlay amounts
to 12 percent of the country's $110 billion budget.

"Indonesia, Thailand, and India all earmarked fairly hefty
government spending," said Edmund Harriss, who holds Asian shares
in about $400 million of stocks he manages at Guinness Atkinson
Asset Management in London.

"A lot of money will have to be spent."