As political will to spend tangible amounts of public budgets on infrastructure projects - be it the US, UK or China - Credit Suisse is recalculating its investments in the sector.
'While much focus has been given since the US elections to the transport infrastructure, we highlight affordable housing and energy infrastructure as areas with particular potential for investors,' Nannette Hechler Fayd'herbe, head investment strategy and research said at the bank's 2017 Global Megatrends Conference, titled 'The Future. Now'.
According to the Swiss bank, the first wave of direct beneficiaries from transport infrastructure have already seen their equity values price-in expectations of future growth.
'Valuations, especially within the industrials sector, are full in our view and while there are still opportunities within materials and industrials, we have decided to refine our exposure by shifting our focus towards other areas of infrastructure spending,' it said.
According to Credit Suisse, investors have not been giving enough attention to public housing, especially the ones geared towards lower and middle income groups.
This includes affordable housing units as well as schools, healthcare facilities, transportation and emplotment.
Financially, in many economies, affordability is defined as cost of housing that does not exceed 30%-40% of household income.
Many governments are starting to take note of the issue - the UK has announced plans to disburse GBP 1.4 billion for the construction of affordable housing; Canada will spend $11.6 billion on the same for the next 10 years; and India has launched a 'Housing for All' scheme which aims to build ~22 million low-cost homes across all urban areas by 2022.
Water and energy
Credit Suisse has also identified companies in energy and water infrastructure that should get a meaningful earnings lift through infrastructure spending by governments.
'The increased use of renewable energy should drive a need for more spending on improving electricity grid infrastructure and interconnection, and also provide opportunities for battery storage,' it said.
'Utility companies along with government organisations will increasingly be called upon to build sustainable water infrastructure, in our view.'