Oil is not the only essential commodity that’s been rising as of late. In certain parts of the globe, rising water costs have also been affecting users at a city or even country level, as in the case of Singapore.
“Singapore will raise the price of water by 18% over two years from April, as the natural resources-lacking city state grapples with rising production costs,” Bloomberg reported, adding that consumers will be hit with “an additional S$0.50 per cubic meter of water, which means most households will see an increase of less than S$10 in their monthly water bills once the full price revision takes effect, the national water agency PUB said in a statement Wednesday (September 27).”
It certainly adds to the wall of worry consumers are facing amid high inflation. As central banks around the world are raising rates in order to cope, consumers are having to tighten their belts. This comes to food, fuel, and as mentioned, water in some cases.
The challenges associated with resources does create an opportunity for niche exchange traded funds (ETFs) like the Invesco Water Resources ETF (PHO). Water is obviously essential given its use in a variety of applications that go beyond sustenance.
Additionally, it’s also difficult to ignore a global water crisis, which can have a profound effect on emerging economies. The World Economic Forum have concluded that more than $26 trillion will be spent on water provisions by 2030. Water scarcity is urgent, and there is a growing need to find solutions in today’s environment.
Mid-Cap Exposure to Water Companies
In terms of PHO’s market cap and style allocation, just over 50% of the fund consists of mid-cap blend and mid-cap growth exposure. Getting mid-cap exposure provides investors with large-cap stability. However, it also attains the growth exposure that small-cap stocks can provide for the long-term investment horizon.
Per its generalized fund description, PHO is based on the NASDAQ OMX US Water Index. This index contains public companies within the water industry that focus on areas such as water utilities, machinery, life sciences tools and services, and many others.
From a macroeconomic perspective, water resources is an industry that can thrive in various economic conditions. It is an ongoing need — a boon in times of heavy market volatility. Moreover, as mentioned in the case of Singapore, challenges to obtaining water is a global issue that affects developed and emerging economies.
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