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Business Times
2 days ago
- Business
- Business Times
Equities opportunities in water and environmental solutions
[GENEVA] While themes such as digital and robotics have been leading the way in financial performance in recent years at Pictet Asset Management (Pictet AM) – a pioneer in thematic equities – the asset manager remains excited by the themes of water and global environmental opportunities. Pictet AM, which has been investing in water opportunities for 25 years, sees a US$1.4 trillion global water market growing at between 3 to 5 per cent annually, supporting a diversified investment universe. According to the asset manager, seven megatrends underpin the water theme, namely climate change, resource scarcity, focus on health, environmental quality, urbanisation, economic growth and commercialisation. Cedric Lecamp, who heads the investment team for the water strategy at Pictet AM, oversees about 10.2 billion euros (S$15.3 billion) in assets under management (AUM). He sees the water universe as being everything to the water value chain, and focusing on three particular elements – water technologies, water supply and environmental services. Water technologies can range from water efficient faucets used in a consumer residential setting to monitoring equipment to help analyse water quality and water efficient irrigation systems. Water supply tends to be regulated utilities that operate in natural monopolies, which have defensive characteristics and stable cash flows. A NEWSLETTER FOR YOU Friday, 12.30 pm ESG Insights An exclusive weekly report on the latest environmental, social and governance issues. Sign Up Sign Up Environmental services are generally engineering companies. This includes companies that design water and wastewater treatment plants, but also engineering and consulting companies that help industrial users of water map and reduce their water use. In the water strategy portfolio are around 48 companies, the bulk of which are predominantly in North America. Positions, on average, are held for seven years, added Lecamp. 'We think the best way to offer investors returns in the water universe is to stay with high-quality companies that have high return on invested capital,' he elaborated, noting that these companies tend to be more in the US than the rest of the world. As for returns generated for share investors in Pictet AM's water strategy, this is about 8.6 per cent per annum in euro terms, mainly driven by share prices appreciation of the listed equities, said Lecamp. Water reuse is one of four front of mind issues for Lecamp. He sees much untapped potential to address water availability challenges to meet growing needs for municipal drinking water and from industry. He noted that by 2050, around 50 per cent of global water extraction could be reused, versus around 12 per cent today, as prospects for growth water reuse are being buoyed by technological disruptions and innovations. Lecamp's other front-of-mind issues are the growing penetration of professional waste management services, closing the water infrastructure spending deficit and the increase in private sector participation to achieve universal coverage of water and wastewater. For one, public spending on water that averages 0.7 per cent of gross domestic product is insufficient to stop the ageing of water infrastructure, argues Lecamp. Environmental opportunities Meanwhile, on the environment solutions front, Pictet AM is eyeing opportunities presented by what it estimates is a US$5 trillion market, which is growing at around seven to 8 per cent per annum. Pictet AM's global environment opportunities strategy has around US$8 billion of AUM and is invested in around 40 to 45 companies, said senior investment manager Luciano Diana. By geography, over 60 per cent of portfolio companies are in the US, while about 25 per cent are in Europe, said Diana. He added that some non-Asian portfolio companies have substantial Asian exposure in their business. For Pictet AM's environmental strategy, the focus is on investing in relatively mature technology and in companies that generate strong free cash flow, he said. The average holding period of investments is about 3.5 years. Pictet AM breaks down environmental solutions into seven segments – renewable energy, energy efficiency, dematerialised economy, sustainable agriculture and forestry, water supply and technology, waste management and recycling, and pollution control. Currently, the largest segment of Pictet AM's portfolio in the environmental theme is in energy efficiency, which covers industrial efficiency, building efficiency and transportation electrification. Diana said the exposure to renewable energy has been very low because 'there are a lot of companies that might grow revenues, but they operate in an industry that is very commoditised'. Looking ahead, a growth driver that excites Diana is being in the early innings of a US investment wave which accelerates demand for power. He sees power demand growth in the US being spurred by demand for big data, increasing electrification and resurgence in industrial manufacturing. He noted US electricity generation could see a compound annual growth rate over the 2024-2030 period, which is six times that of the prior years this century. The other big growth driver is growing demand for climate adaptation solutions, which is in turn being fuelled by extreme weather events, said Diana. He sees a continued push for mitigation solutions to slow or prevent climate change, with an example being renewable energy, as well as for adaptation solutions to limit the damage that environmental changes cause such as flood defences. Currently, Pictet AM's thematic equities platform has around US$70 billion in AUM across 16 strategies. There are over 70 investment professionals in thematic equities, led by its head Hans Peter Portner. He views thematic equities as combining the liquidity benefits of listed equities with the tangibility of venture capital. According to Portner, themes are pockets of economic activities underpinned by megatrends and that companies exposed to said pockets of economic activities have predictable value drivers as well as visibility on growth and margins. The megatrends are in turn large social, economic, political, environmental or technological transformations, which represent tectonic shifts that occur over decades. Pictet AM, which is part of Pictet Group, has been operating in the thematic equities space since 1995.
Yahoo
02-07-2025
- Business
- Yahoo
Wall Street has faith in Trump. It could all end in tears
All is forgiven. Wall Street has soared to record highs just months after Donald Trump unleashed tariff chaos on the world. The S&P 500 stock index has surged nearly 25pc from the nadir it reached in the days after the US president announced his 'liberation day' tariffs on April 2. The benchmark completed its best quarter since December 2023 on Monday as it reached a new high, even as Trump threatens to impose fresh tariffs within weeks. This will please a president who has long viewed the stock market as an unofficial straw poll on his performance. But is such a full-throated endorsement of Trump's economic plans justified? Not everyone is convinced. '[Stocks] are at an all time high and the risks are still there,' points out Luca Paolini, the chief strategist at Pictet Asset Management. 'It is not as bad as it was but it is not as good as it was a year ago. 'Our view is that it's going to get weaker and that's why we don't buy into the strength of the market.' Stocks have surged even as official data, published last week, confirmed that the US economy shrank by half a percentage point at the start of the year. 'The US economy is somewhat slowing and when you have those types of stock valuations, there's not much room for deception,' says Kevin Thozet, a member of the investment committee at European asset manager Carmignac. Stock prices on the S&P 500 are trading at about 22 times earnings, which assumes that companies will experience astonishing growth in profits in coming years. 'This recovery is driven entirely by soaring valuations rather than earnings upgrades, signalling underlying fragility,' Susana Cruz and Joachim Klement, analysts at stockbroker Panmure Liberum, have warned. The current stock market rally is 'built on shaky ground, given the deep economic uncertainty'. There are some good reasons for stocks to have roared back since Trump announced his 'liberation day' tariffs. 'Markets are always navigating a very uncertain environment. The question is, 'Is it worse or better than a few months ago?' And I think the market, correctly so, came to the conclusion that it's probably better,' says Paolini. 'The trade war that was supposed to be terrible for the global economy. It doesn't look like it is going to be that bad because there are going to be deals between the US-UK, US-India, Vietnam, probably Europe and Japan. 'So yes, there will be higher tariffs, but we are probably going to avoid a devastating trade war of everyone against everyone else.' Rory McPherson, the chief investment officer at Wren Sterling, says: 'Corporate earnings have been really strong. The earnings for the rest of the year have not been downgraded by anything like what they were downgraded in previous crises. 'Yes, they have been downgraded and the downgrade for the year is almost 4pc but that's not too far out of whack.' However, Paolini warns that the surge in stocks means there is 'very limited upside from here because equities are very, very expensive'. The big question hanging over the stock market is the future of so-called US exceptionalism – the previously self-reinforcing theory that America is unique and distinct from other nations. This belief has long helped to prop up stock markets, with investors betting that American businesses will pull through even the most difficult patches. But there are signs that this faith is being shaken. The dollar has suffered its worst first half of the year since 1973 and concerns about Trump's plans to borrow hundreds of billions have seen borrowing costs jump, prompting jokes that the president could become 'Donald Truss'. 'If I'm looking further out I think Trump's policies would lead to a lower US dollar and higher interest rates,' says Thozet of Carmignac. 'The Trump administration wants to have more manufacturing, more stuff made in the US and this comes with a lower dollar policy. And there's a risk that these higher interest rates deflates the elevated prices on US equities.' The man who could make or break the Wall Street rally is Jerome Powell, the chairman of the Federal Reserve. Lower interest rates would spur economic activity and help boost corporate profits. Traders are currently pricing in two cuts before the end of 2025 and a 53pc chance of a third, anticipating that policymakers will react to a slowdown in the American jobs market, which added 139,000 jobs in May, down from 147,000 in April. However, Powell warned on Tuesday at the ECB Forum in Sintra that policymakers had kept rates 'on hold when we saw the size of the tariffs'. He also warned that the 'US federal fiscal path is not a sustainable one' as the Senate edged closer to approving Mr Trump's 'One Big Beautiful Bill', which would cut taxes and add an estimated $3.3 trillion (£2.4 trillion) to the American government deficit over the next 10 years. Those comments will infuriate Mr Trump, who has repeatedly pressured 'Too Late' Powell to cut rates. As the melodrama plays out, Wall Street waits. 'It is not blind hope,' insists McPherson. 'The US has a lot more upside from here.' Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
Telegraph
02-07-2025
- Business
- Telegraph
Wall Street has faith in Trump. It could all end in tears
All is forgiven. Wall Street has soared to record highs just months after Donald Trump unleashed tariff chaos on the world. The S&P 500 stock index has surged nearly 25pc from the nadir it reached in the days after the US president announced his ' liberation day ' tariffs on April 2. The benchmark completed its best quarter since December 2023 on Monday as it reached a new high, even as Trump threatens to impose fresh tariffs within weeks. This will please a president who has long viewed the stock market as an unofficial straw poll on his performance. But is such a full-throated endorsement of Trump's economic plans justified? Not everyone is convinced. '[Stocks] are at an all time high and the risks are still there,' points out Luca Paolini, the chief strategist at Pictet Asset Management. 'It is not as bad as it was but it is not as good as it was a year ago. 'Our view is that it's going to get weaker and that's why we don't buy into the strength of the market.' Stocks have surged even as official data, published last week, confirmed that the US economy shrank by half a percentage point at the start of the year. 'The US economy is somewhat slowing and when you have those types of stock valuations, there's not much room for deception,' says Kevin Thozet, a member of the investment committee at European asset manager Carmignac. Stock prices on the S&P 500 are trading at about 22 times earnings, which assumes that companies will experience astonishing growth in profits in coming years. 'This recovery is driven entirely by soaring valuations rather than earnings upgrades, signalling underlying fragility,' Susana Cruz and Joachim Klement, analysts at stockbroker Panmure Liberum, have warned. The current stock market rally is 'built on shaky ground, given the deep economic uncertainty'. There are some good reasons for stocks to have roared back since Trump announced his 'liberation day' tariffs. 'Markets are always navigating a very uncertain environment. The question is, 'Is it worse or better than a few months ago?' And I think the market, correctly so, came to the conclusion that it's probably better,' says Paolini. 'The trade war that was supposed to be terrible for the global economy. It doesn't look like it is going to be that bad because there are going to be deals between the US-UK, US-India, Vietnam, probably Europe and Japan. 'So yes, there will be higher tariffs, but we are probably going to avoid a devastating trade war of everyone against everyone else.' Rory McPherson, the chief investment officer at Wren Sterling, says: 'Corporate earnings have been really strong. The earnings for the rest of the year have not been downgraded by anything like what they were downgraded in previous crises. 'Yes, they have been downgraded and the downgrade for the year is almost 4pc but that's not too far out of whack.' However, Paolini warns that the surge in stocks means there is 'very limited upside from here because equities are very, very expensive'. The big question hanging over the stock market is the future of so-called US exceptionalism – the previously self-reinforcing theory that America is unique and distinct from other nations. This belief has long helped to prop up stock markets, with investors betting that American businesses will pull through even the most difficult patches. But there are signs that this faith is being shaken. The dollar has suffered its worst first half of the year since 1973 and concerns about Trump's plans to borrow hundreds of billions have seen borrowing costs jump, prompting jokes that the president could become 'Donald Truss'. 'If I'm looking further out I think Trump's policies would lead to a lower US dollar and higher interest rates,' says Thozet of Carmignac. 'The Trump administration wants to have more manufacturing, more stuff made in the US and this comes with a lower dollar policy. And there's a risk that these higher interest rates deflates the elevated prices on US equities.' The man who could make or break the Wall Street rally is Jerome Powell, the chairman of the Federal Reserve. Lower interest rates would spur economic activity and help boost corporate profits. Traders are currently pricing in two cuts before the end of 2025 and a 53pc chance of a third, anticipating that policymakers will react to a slowdown in the American jobs market, which added 139,000 jobs in May, down from 147,000 in April. However, Powell warned on Tuesday at the ECB Forum in Sintra that policymakers had kept rates 'on hold when we saw the size of the tariffs'. He also warned that the 'US federal fiscal path is not a sustainable one' as the Senate edged closer to approving Mr Trump's ' One Big Beautiful Bill ', which would cut taxes and add an estimated $3.3 trillion (£2.4 trillion) to the American government deficit over the next 10 years. Those comments will infuriate Mr Trump, who has repeatedly pressured 'Too Late' Powell to cut rates. As the melodrama plays out, Wall Street waits. 'It is not blind hope,' insists McPherson. 'The US has a lot more upside from here.'
Japan Times
26-06-2025
- Business
- Japan Times
Foreign buying of Japanese stocks marks 12-week streak, TSE data shows
Foreign investors were net buyers of Japanese stocks for the 12th consecutive week, according to data released Thursday from Tokyo Stock Exchange operator the Japan Exchange Group. But their net buying fell to the lowest in the past 12 weeks while separate data, released earlier in the day from the Finance Ministry, showed foreign investors became net sellers for the first time since March, suggesting their appetite may be waning. The Finance Ministry's data is based on reporting from major market players and covers not just stocks but also exchange traded funds and over-the-counter trades. According to the exchange data, foreign investors bought ¥88.4 billion ($614 million) of Japanese equities in the week that ended on June 20. The continued buying has echoes of the April-June quarter in 2023, when Warren Buffett's investment in trading houses and hopes of corporate governance reforms impelled foreign investors to pile into Japanese stocks. The size of their buying was smaller this time. During the second quarter of 2023, foreign investors bought ¥6.1 trillion, dwarfing the net total buying since April of ¥4.1 trillion. The latest inflows may have been driven by global investors who are rotating out of U.S. stocks that have become expensive, experts say. "It's not like Japanese earnings were strong or investors were getting (more) positive about Japan,' said Hiroshi Matsumoto, senior client portfolio manager at Pictet Asset Management Japan. "The market has risen even as the earnings aren't that strong. So the market's valuation has become a bit rich,' he said. Data from the Finance Ministry shows foreign investors sold a net ¥524.3 billion of shares in the period that ended on June 20.
Japan Times
26-06-2025
- Business
- Japan Times
Foreign investors sold Japan stocks for first time in 12 weeks
Foreign investors were net sellers of Japanese stocks last week for the first time since March, according to data from the Finance Ministry. They sold a net ¥524.3 billion ($3.62 billion) of the shares in the period ended June 20, the data showed Thursday. In the 11 weeks prior to that, the investors bought ¥7.236 trillion of Japanese stocks in total despite concerns about U.S. tariffs. "The market has risen even as the earnings aren't that strong. So the market's valuation has become a bit rich,' said Hiroshi Matsumoto, senior client portfolio manager at Pictet Asset Management Japan. The ministry's data is based on reporting from major market players and covers not just stocks but also ETFs and over-the-counter (OTC) trades. Separate data from the Tokyo Stock Exchange, which covers just listed stocks, has also shown foreign investors have been buying Japanese stocks for 11 weeks. Many market players suspect the continued inflow likely reflects global investors' rotation out of U.S. stocks.
