Listed companies win big as China's war against pollution gains steam

There's a bright future ahead for wastewater treatment stocks.

Singapore-listed companies with exposure to China’s wastewater treatment sector are expected to benefit from the country’s aggressive anti-pollution drive, according to a report by RHB.

RHB said that China is set to invest some CNY5 trillion by 2020 to improve its water treatment industry.

With China’s highly fragmented water sector, RHB prefers to stick to bigger players with stronger balance sheets and first-mover advantages that enable them to embark on acquisition sprees.

“As it takes about two years and high capex to build a new treatment plant, we expect excess demand to persist in the sector over the next five years. We have SIIC Environment Holdings as our Top Pick in the sector. With a low average tariff of CNY0.90/tonne, we believe SIIC is the key beneficiary of water reforms in China. We also like China Everbright Water which has a strong balance sheet to help it fulfil its aspiration to be one of the leading wastewater treatment companies in China,” said RHB.