Ecofin expecting more consolidation in water sector

17th Feb 2011 07:42

Ecofin, the investment company specialising in utility shares, said the net asset value of its ordinary shares at the end of January stood at 171.70p, down 1.7% from a year earlier. The company said it has maintained its exposure to water companies, where it expects another phase of consolidation to take place. It also sees significant recovery potential in Spanish utilities.In North America, the company expects integrated utilities to outperform regulated utilities and for growth to outperform pure yield. "Inflation edging higher is not good for bonds or regulated utilities," the company said.Chinese markets remained weak in January, with economic trends suggesting that China will suffer from a combination of slower growth and rising inflation, at least in the near term, which is likely to be negative for equity markets, the company believes."We expect the government to implement a series of monetary tightening measures to withdraw excess liquidity from the system. While such tightening is actually positive for the overall health of the economy in the medium term, it could create short-term pressure on equity markets, which we believe will present a good entry opportunity for many quality stocks in our sectors," the statement concluded.