Massive investment to shield emerging markets: James Saft

(James Saft is a Reuters columnist. The opinions expressed are his own)

By James Saft

LONDON (Reuters) - It probably won't be pretty and it certainly will be volatile, but massive investment in infrastructure and the absence of a debt bubble will allow emerging markets to fare better even as the developed world struggles.

Emerging markets have had a bad start to the year, hurt by a growing fear that a recession in the United States would, as it historically has, hit them harder, dashing hopes for a "decoupling".

The MSCI Emerging Markets index has fallen 12 percent, more than the main developed markets index, and investment in emerging market debt is showing a loss for the year.

But an historic program of urbanization in emerging markets - and all that entails; power, transport and a growing service sector - is highly unlikely to be derailed and will provide huge stimulus to offset falls in exports.

Fixed investment, such as in roads, rail, utilities and buildings, rose by 27 percent in China and India last year, according to Nomura International, and at a combined $2.2 trillion is poised to exceed that of the United States in the next two years.

"What it means is that emerging markets will probably decouple more than most people believe," said Shanat Patel, global emerging market strategist at Nomura in London.

"Exports are much smaller than fixed asset spending but people think an export-led slowdown will slow fixed asset spending quite sharply. That would be the tail wagging the dog."