Water: Deutsche initiates on the China water and waste sector. Notes China became the world’s largest investor in renewable energy in the 11th Five-Year Plan period, and expects the country to become the largest investor in environmental protection in the 12th Five-Year period, with over Rmb1tr allocated to the sewage and solid waste treatment industry. Believes China’s environmental players should be presented with abundant project opportunities, driven by rising demand from local govts to meet pollution targets, and increasing supply from the privatization of the sector. Also forecasts project returns to improve as treatment tariffs increase to promote water conservation and attract private investment.
Expects the regulatory environment to become more supportive, given the Chinese govt’s positive stance on environmental protection, and expects the upcoming release of the 12th Five-Year Environmental Industry Plan to provide a clearer investment roadmap and to act as a short-term catalyst for the sector.
Deutsche has Buy ratings on the HK water players (BEWH, China Everbright, Guangdong Investment), but also has an unrated feature on Sound Global in its report.
The Deutsche report coincides with positive announcements from Spore’s water-related counters.