Index outperforms as Asian stocks rebound

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A strong performance by Asian water stocks this month helped to wipe out last month’s losses. With more and more companies being taken private, investors are being forced to re-allocate resources elsewhere.

Asian water stocks regained the ground they lost in last month’s carnage, but are still well off the levels seen at the start of this year.

 
A strong showing by Malaysian, Chinese and Singapore-listed stocks helped the GWI Global Water Index to outperform the benchmark MSCI World Index by more than 1% this month, as the Asian segment of our index rallied by nearly 11%, easily beating all the major Asian stock indices.
 
After dominating the ‘worst performers’ table last month, nine out of this month’s top performers were Asian stocks, with Heckmann Corporation the only non-Asian entity to make it into the league table.
 
Perversely, it is Heckmann’s exit from Asia which helped propel the company’s stock forward this month – having sold its Chinese bottled water business at the end of September, Heckmann announced a record set of quarterly results at the beginning of November, which should help the company meet its 2011 target of more than $150 million in revenue and adjusted EBITA of $40 million.
 
Heckmann also continues to attract top talent from among the USFilter diaspora, hiring Chris Chisholm as its new CFO on 15 November.
 
American Water shares, meanwhile, reached an all-time high of $31.19 on 7th November, partly thanks to a robust set of third-quarter results, which showed that the company continues to deliver on its strategy. The numbers convinced Michael Gaugler of Brean Murray Carret to raise his target price on the stock from $38 to $39.
 
We have had something of a clear-out in the index this month. Northumbrian Water was delisted from the London Stock Exchange on 14 October following the takeover by CKI, and we have also removed two Asian stocks from the index due to takeovers. Trading in Asia Environment was suspended on 24 October ahead of an imminent delisting related to its takeover by Ciena Enterprises, while Ranhill was delisted from the Kuala Lumpur exchange on 14 November following a buyout by a consortium led by chief executive Tan Sri Hamdan Mohamad.
 
There is precious little in the way of new stocks to take their place, although the trickle of smaller IPOs continues, with Philippines-based Calapan Ventures setting a stock price of PHP2.50 on 4th November for its forthcoming stock market debut. The price values the company’s equity at PHP405 million ($9.3 million).
 
Replacing ITT in the index this month is Xylem – the water pure-play which was spun off from the ‘old’ ITT Corporation on 1st November. Xylem began regular-way trading on the New York Stock Exchange on 1st November, ending its first day at $27.31, giving a market cap of over $5 billion. The stock has since slipped back to sit at just over $24 as GWI went to press.
 
Last month also saw the market get its first taste of Aegion, although in this case it was a simple name change, replacing Insituform. CEO Joe Burgess assured GWI that the individual brand names – which include Bayou, Corrpro and Insituform – would remain.
 
It remains to be seen which brands Veolia will retain following its imminent reshuffle. The world is waiting with baited breath to see where CEO Antoine Frérot will wield his scissors at the company’s investor day in Paris on 6th December.