Davies expects the Foxes to flex their financial muscle as a demonstration of their intent to earn a place in the top flight.
Davies insists last week`s signings of Chris Kirkland and Roman Bednar was an indication of Leicester`s ambition and the Scot believes Sven-Goran Eriksson`s side will force their way into the promotion race.
"The investment in January tells you an awful lot about what will take place between then and the end of the season and I am sure Leicester will be making big statements in the new year," said Davies.
"Every club has it's own financial situation. All clubs will have different expectations and budgets in January but they have new investment.
"They are making a statement now by signing good players but you will see a bigger one in January from them. I think they are trying to take things to a new level there. Only in time will that perhaps become apparent."
Davies added: "I was not surprised to see Sven go there, you knew he was there for a reason. He is part of the wind of change."