Water: Liquid investment opportunities May 31, 2024

Water: Liquid investment opportunities

The Singapore International Water Week (SIWW) is a leading global platform for water industry professionals to share knowledge and co-create innovative water solutions. This biennial event is held in Singapore and is organised by PUB, Singapore’s national water agency, in conjunction with the Singapore Ministry of Sustainability and the Environment.1

Water: Liquid investment opportunities


Singapore International Water Week

The 10th edition of SIWW will take place this year from 18 to 22 June 2024 at the Sands Expo and Convention Centre in Singapore. The event will focus on key themes such as climate mitigation, water sustainability, net zero and decarbonisation, resource circularity, and digitalisation. A new pillar on climate adaptation, specifically coastal protection and flood resilience, will also be introduced for the first time.

SIWW brings together thought leaders, experts, and practitioners from governments, cities, utilities, and industries to share knowledge and best practices on water-related issues. The event features a variety of programs, including:

  • The Lee Kuan Yew Water Prize: A prestigious award that recognises outstanding achievements in water management
  • Water Leaders’ Summit: A platform for government leaders to discuss water challenges and solutions
  • Water Convention: A technical conference that covers a wide range of water-related topics
  • Water Expo: A trade show that showcases the latest water technologies and solutions
  • Business Forums: Events that provide opportunities for businesses to network and explore partnerships Technical Site Visits: Tours of water facilities in Singapore

SIWW is a valuable event for anyone involved in the water industry. It provides a platform for learning about the latest trends and technologies, networking with other professionals, and finding solutions to water challenges.


ETFs and stocks linked to the water industry

As SIWW highlights the critical role of innovation and collaboration in the water sector, it also underscores the investment opportunities within this essential industry. For those looking to invest directly in the future of water management and technology, several ETFs and stocks offer a pathway to participate in this vital sector. Here are a few notable examples:


ETFs

  • Invesco Water Resources ETF (PHO) This ETF tracks the performance of companies in the business of purifying, delivering, and conserving water for homes, businesses, and industries. It is the largest and most popular water ETF, with over US$3 billion in assets under management.

  • First Trust Water ETF (FIW) This ETF invests in companies involved in water treatment, infrastructure, and utilities, providing investors with a broad exposure to the water industry.

  • iShares Global Water UCITS ETF: This ETF offers exposure to a diversified basket of global water companies. It tracks the S&P Global Water Index, which includes companies from developed and emerging markets.


Stocks

Alongside ETFs, several key companies stand out for their contributions to the water industry:

  • American Water Works (AWK): As the largest publicly traded water utility company in the United States, AWK provides water and wastewater services to millions of customers in 16 states.
  • Xylem Inc. (XYL): This company manufactures water treatment and transportation technologies. It is a global leader in pumps, valves, and other water-related equipment.
  • Danaher Corporation (DHR): This diversified industrial company manufactures various products, including water treatment technologies. Its Water Quality platform includes brands like Hach Lange, ChemTreat, and Trojan Technologies.


Investing in water ETFs and stocks can be a good way to gain exposure to a growing industry. Water is becoming an increasingly scarce resource, and as demand for sustainable water management solutions rises, companies specializing in water treatment, infrastructure, and related services are expected to experience sustained demand.

Here are some additional factors to consider before investing in water ETFs or stocks:

  • The expense ratio: The expense ratio is the annual fee that an ETF charges its investors. Lower expense ratios are generally preferable as they reduce the cost of investment.
  • The underlying holdings: It is important to understand what companies an ETF invests in before you invest in it. This knowledge will help you align your investments with your values and financial goals.
  • Risk tolerance: While water ETFs and stocks are generally considered less risky than other individual stocks, they are still subject to market fluctuations. Ensure that your investment choices match your risk tolerance


There are several ways to invest in the Singapore water sector, each offering unique opportunities:

  • Water utilities: These companies play a critical role in ensuring access to clean water by providing water treatment and distribution services.
  • Water infrastructure companies: These companies build and maintain essential water treatment plants, pipelines, and other water related infrastructure, supporting the backbone of water services.
  • Environmental services companies: These businesses focus on water treatment and pollution control services, helping to maintain environmental standards and sustainability.


Here are some notable Singapore water-related shares that you can consider investing in through POEMS:

  • Sembcorp Industries (SGX: U96) is a diversified Singaporean conglomerate. It provides water treatment and desalination services, contributing to water sustainability and innovation.3
  • Keppel Infrastructure Trust (SGX: REIT) is a Singapore real estate investment trust (REIT) that invests in water infrastructure assets.4
  • China Everbright Water Limited (SGX: CEWL) specialises in water treatment and supply services primarily in China, playing a significant role in managing water resources in one of the world’s most populous countries.


Here are some of the top water-related stocks in Asia:

  • Kurita Water Industries (6370) (Japan): This company manufactures chemicals needed to treat water and builds, operates, and maintains water treatment plants. It also sells related products to businesses and the general public. While Japan is its main market, it generates a significant portion of its revenue overseas.
  • Beijing Enterprises Water Group (0371) (China): This company specialises in water supply and wastewater treatment services primarily in Beijing and surrounding regions, playing a critical role in managing water resources in one of China’s major metropolitan areas.


Conclusion

Investing in water-related stocks offers a unique opportunity to engage with a sector that is crucial for sustainable development. As the global demand for clean and accessible water continues to grow, the water industry presents compelling opportunities for investors. By conducting thorough research and considering the broader market dynamics, investors can make informed decisions that not only yield returns but also support crucial environmental initiatives. This approach allows for diversifying portfolios while contributing positively to global sustainability goals.


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About the author

Elston Xavier Soares
Research

The author is an editor with Phillip Securities Research

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