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Home | RARE Infrastructure Value Fund Market Commentary – March 2010

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RARE Infrastructure Value Fund Market Commentary – March 2010

April 21 2010

March was a very strong month for virtually all equity markets as economic data continued to surprise many economists and market participants. Developed markets (MSCI World, local) finished up 6.3% and emerging markets (MSCI EM, local) up 6.1%.

Over the last 9 months RARE has consistently commented that investors will observe rising Treasury yields and increased employment, pointing to a stronger than expected recovery. These signposts received economic support in March (continuing into April) and were the primary reason for strong equity markets. Treasuries felt the weight of the more robust economic climate, of heightened global inflation fears, of rising crude oil prices (to $87 per barrel) and of substantial worries about sovereign debt. Of course looking forward this creates tension for equity markets with an improving economy on one hand and rising rates on the other.

Infra Regulation. The independent electricity pricing regulator in NSW (Australia) followed moves elsewhere in Australia approving price hikes of 20-42% for the 2010-13 period and warning of another 24% increase in energy costs.

Infra M&A. There were a number of M&A announcements in the sector including:

  •        Mexico announced plans to tender US$50b of projects during 2010
  •        Forth Ports (UK, Port) has rejected two takeover offers
  •        Ferrovial announced it will dispose of 10% of the 407ETR tollroad in
           Toronto

Infra Funding. March proved to be a very active month for equity and debt financings in the infrastructure space. IPO’s included Chongqing Water  US$511m (China, water); Ecorodovias US$764m (Brazil, tollroad), Avantha Power (India) announced plans to float while the UK Government announced plans to seed a  green infra fund with up to £1b. In the debt capital markets, Wales and West Utilities (UK, utility) launched a £5b bond program and Transurban (Australia, tollroad) raised A$250m at 180bps over swaps.

Other Infra News. It is expected that damage sustained to infrastructure from Chile’s earthquake will be covered by insurance.