GWI Water Index in 2014 reaches New Record High
The highly acclaimed GWI Water Index, that tracks water stock performance in Global Water, Asia, EMEA and the Americas, has been released for 2014 by Global Water Intelligence Magazine. The GWI Global Water Index rose by 10.5% in dollar terms in 2014, ending at a new record high as it outperformed the MSCI World Index by more than five percentage points.
The January issue of Global Water Intelligence Magazine revealed that retail investors rushed into the sector last year, committing significant volumes of capital to specialist water strategies. The year also marked a dramatic resurgence in the number of initial public offerings by companies with significant water-derived revenues.
In the US, regulated water utilities were a good place to park cash in 2014, as valuations rose by a fifth over the course of the year. Listed US water utility stocks advanced by nearly 20% last year, buoyed by an underlying desire on the part of institutional investors to hold solid, defensive names.
American Water, the largest investor owned water utility by market capitalisation, had another outstanding year, rising by 26%. Those which generated the majority of their revenues from North America generally did better than those with exposure to Europe or Asia.
Though healthy industrial growth in the US was a major boon to companies like Xylem in 2014, the drop in oil prices is already putting a damper on capital expenditures in the oil and gas exploration sector. “I just can’t see anybody testing new products with something that’s really unproven for quite some time,” Wedbush Securities analyst David Rose said. “I think it’s going to be a tough environment in 2015.”
Brazilian water stocks continued to fall sharply in the election year of 2014, as Sabesp and Copasa, the two most actively traded companies, each lost around a third of their value.
Constructive environmental policies in China and India have helped the GWI Asian Water Index to rise to heights not seen since before the global financial crisis. The Asian segment of the GWI Global Water Index soared by 21.5% over the course of 2014 to make it the top regional performer for the second year running.
In India, meanwhile, EPC contractor VA Tech Wabag soaked up investor excitement to rank as the best performing global water stock last year, recording a stunning 163% rise. 2014 was a tale of domestic private sector companies finding their stride.
The icing on the cake came towards the end of the year, as the central government released a slew of declarations calling for private sector investment in provincial infrastructure, and promised to repackage existing private sector projects under the aegis of its new national PPP Centre.
In Europe, two-thirds of the listed European water companies in the GWI Global Water Index registered impressive share price gains over 2014, as the weighted portfolio of stocks in the region rose by 19.5% over the course of last year.
The shares of all five largest stocks by market capitalisation rose significantly over the 12-month period for the first time in three years, with price increases ranging from just under 11% (Suez) to just under 40% (Pennon). All three ended the year substantially higher than they were on 10th October – Pennon up by 21% over the 12 weeks, United Utilities up by 17%, and Severn Trent up by just over 8%.
While 2014 was another quiet year in terms of big-ticket mergers and acquisitions in the water industry, there are expectations that the market will need to play catch-up to in 2015.
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