Pacific Investment Management Co. is favoring sectors from U.S. housing to emerging-market banks for growth as chronic budget deficits in developed countries slow the global economy.
U.S. housing and energy, Asian gas distribution and gaming as well as Latin American banks should grow faster than their respective economies, Mark Kiesel, global head of corporate bond portfolios at the manager of the world’s biggest debt fund, wrote today on the firm’s website in a report titled “Go for Growth.”
Europe’s debt crisis, the looming U.S. fiscal cliff of higher taxes and spending cuts, and slower growth in emerging markets may weaken global expansion, Kiesel wrote. Yields on corporate bonds are at about record lows as the Federal Reserve has held its benchmark interest rate near zero for four years. Fed Chairman Ben S. Bernanke said in September he expects no change in policy through mid-2015.
Homebuilders such as Federal Way, Washington-based Weyerhaeuser Co. (WY) should benefit from a recovery in housing as the number of existing homes for sale are at a seven-year low with the number of new single-family home building permits hovering near a 45-year nadir. With U.S. crude oil production at a 15-year high and growing at 15 percent annually, companies with ties to emerging oil and gas shale regions in the U.S. are likely to expand, according to the report.
“America’s recent ascent in domestic oil and gas production is truly a game changer for the U.S. energy industry and for the country,” Kiesel wrote.
Natural gas production in China will account for 8 percent of energy consumption by 2015, twice the current share, as the world’s most-populous nation moves toward cleaner energy sources to reduce pollution, Kiesel wrote. Improved infrastructure in Macau and a rising middle class in the country will continue the gaming region’s growth, whose annual revenue has increased six times in the last 6 1/2 years to $36 billion.
“We similarly believe that growing wealth throughout Asia, combined with improving infrastructure, will lead to increasing demand from Asian consumers for both Macau and Singapore gaming,” Kiesel wrote.
A larger middle class in Latin America should increase loan growth for the region’s banks. Mexico, Peru and Brazil have significantly lower ratios of loans to economic output, Kiesel wrote.