Once popular with short sellers, China’s biggest water-treatment company is basking in a clean-up of its own, with bearish investors fleeing in droves.
It’s a reminder of the power that Chinese government moves can have in determining winners and losers in the equity market. Little more than a year ago, short positions on Beijing Enterprises Water Group Ltd. soared. The attraction was a highly indebted company in an industry blighted by what analysts describe as opaque reporting standards.
One reason things haven’t panned out for bears: President Xi Jinping’s grand plan for a new metropolis southwest of Beijing is stoking optimism about a new wave of infrastructure, with Beijing Enterprises Water seen among the potential beneficiaries. Also helping: a government initiative to pull private-sector money into public projects, once discounted, is now gaining traction.
All but one of 27 analysts tracked by Bloomberg who cover Beijing Enterprises Water shares have a buy recommendation, making it the highest-rated among peers listed in the Bloomberg World Water Index, according to Bloomberg consensus analyst ratings.
“We expect the company will benefit from its good relationship with the government and see a breakthrough in PPP projects, which will boost its earnings growth,” said Yan Shi, a Shanghai-based analyst at UOB Kay Hian Holdings Ltd.