Water Stocks Beat Gold, Oil as Shortages Loom: Chart of the Day

Shares of water companies are beating those of gold and oil producers as governments from China to India boost spending on basic infrastructure to avert shortages threatening economic growth and political stability.

The CHART OF THE DAY shows the S&P Global Water Index of 50 companies gained 162 percent since Nov. 30, 2001, when Bloomberg started tracking the measure, compared with a 135 percent increase in the S&P Global Oil Index and 37 percent in the S&P/TSX Global Gold Sector Index as of 1:10 p.m. in London. The water-business gauge has rallied 5.5 percent this year, with three China-focused companies among the 10 best performers, led by China Everbright International Ltd.’s 43 percent surge.

“We can’t live without water, we can live without gold,” said Simon Gottelier, a fund manager in London at Impax Asset Management Group Plc, which manages $3.2 billion of assets including a water fund. “As a sector, it has a unique set of long-term drivers based around the need for new investments, predominantly in emerging markets. Water is about as attractive as it gets.”

Increasing urbanization prompted China to pledge a spending of $290 billion on water conservation in the five years to 2015, double the investment in the previous half-decade. Global requirements will reach 6,900 billion cubic meters in 2030, 40 percent more than current sustainable supplies, making water a potential cause of regional conflicts, the U.S. National Intelligence Council said in a December report.

The gold-equities index, comprising 54 securities, fell about one-third this year as bullion dropped to a two-year low. China’s slower-than-expected growth and dollar strength have curbed demand for gold a haven. The oil gauge, which tracks almost a 120 companies, has dropped 2.5 percent this year as the International Energy Agency reduced its forecasts for global oil demand for a third consecutive month.

“If you can find ways to invest in water, you will be extremely rich because we do have a serious water problem in many parts of the world like India, China, the southwestern part of the U.S., and west of the Red Sea,” Jim Rogers, chairman of Rogers Holdings, who foresaw the start of a commodity rally in 1999, told reporters in Singapore on April 15.