Turning water into gold in China

March 12, 2013

By Stephen Eisenhammer

Rivers of gold? Maybe not, but there can be money to be made in Chinese water systems.

With the world’s largest population rapidly moving from the countryside to the city, Chinese water supplies are becoming horribly polluted and the companies wading in to clean and purify them are set to benefit.

Investors are taking an interest in water cleaning companies which are supported by the Chinese government as the country attempts to avoid a dawning crisis.

China is under increasing domestic pressure to clean up its water supplies and is promising to invest 4 trillion yuan ($650 billion) on rural water projects between 2011 and 2020.

Fen Sung, senior investment manager at the asset management fund Premier, said cleaner water would be high on the agenda for the new Chinese leadership:

I hold China Everbright, who are a superb company in China who specialise in water treatment and waste to energy. Recent results and company announcements continue to show strong demand in the sector.

I have recently added a new holding called Sound Global, who are dual-listed in Singapore and Hong Kong. They specialise in the water treatment sector and are trading at an attractive valuation.

China Everbright has risen 40 percent in the last 12 months. Sound Global, meanwhile, has a price to earnings multiple of nine compared to 16 among its peers, according to Thomson Reuters data, and has traded largely flat so far this year. Sung says:

Pollution control will be on the agenda for the new Chinese government and I am confident that both companies can achieve good earnings growth for the coming years.


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