Newsweek: Water Funds

Very Liquid Assets
Water crises are both a dark threat to the world and an increasingly bright investment opportunity.
By Alexandra A. Seno
Newsweek International

Aug. 20-27, 2007 issue - The new oil may be water. According to Global Water Intelligence, a U.K. consultancy, by December total assets under management in water funds could hit a record $20 billion this year, a 53 percent increase from 12 months earlier. No wonder: since 2001, shares in glob-al water companies have gone up 150 percent, according to Thomson Financial. That compares with a 50 percent rise in international blue chips.

The reason is simple: there is profit in scarcity. Buffeted by constant news of dying rivers, droughts and water shortages from China to Mexico, investors are increasingly aware that water is a threatened resource. With more and more governments handing public water systems over to the big multinationals like the U.K.'s Veolia Environnement and Thames Water, profits are rising. One of the top companies, France's Suez, saw global sales from its water unit increase 11.7 percent, helped by a 20.3 percent rise in revenue from China. These days, savvy asset-management companies have turned water-shortage anxieties into a burgeoning investment-fund business. Like the rest of the market, water stocks have fallen recently, but a lot less than, say, U.S. equities. While the Standard & Poor's index plunged by a tenth in the last few weeks, shares in global water companies are down only about 3 percent, helped by international business exposure and the view that cash-generating utilities businesses are a good defense in a downturn.

This year, much of the new money pouring into water funds is coming from Asia, where ethical investing is very new. It may also simply be that Asia is the only developing region that has a combination of remarkably acute water crises and particularly rapid growth, creating a new crop of investors who are intimately familiar with the water threat. Only seven months into 2007, there are now 27 international water funds, more than double the number compared with 2006. Of the 15 new products, nine target Asian investors in Hong Kong, Seoul, Tokyo and Sydney. Since April, when Société Générale's Lyxor Asset Management unit began inundating Hong Kong with ads touting its new water fund, it has raised $320 million from mom-and-pop investors alone, well beyond its expectations.

The price of any company's stock reflects its estimated future earnings, and the potential to make money fixing water problems is huge. In developing markets where affluence is growing, and hundreds of millions of people are set to move from rural to urban areas, water resources are under assault. The Chinese government estimates that demand will increase by 120 percent in the next 25 years, while in India, urban water needs will rise 100 percent in the coming two decades. "We see a combination of exploding demand for water per capita, growing scarcity of supply and massive pollution,'' says Anthony Wilkinson, co-principal of the CLSA Clean Water Asia Fund, which started in May, and invests most of its money in Asia-listed companies.

For major water-treatment specialists, the biggest new projects are in China. Some 1,000 wastewater plants are to be built over the next five years, as the government has pledged more than $125 billion to address the natural-resource shortage. Hundreds of billions more are expected to come from the private sector. A recent report from Macquarie, the investment bank, pegged earnings growth for Singapore-listed water-treatment companies like Epure and Hyflux, which target the China market, at between 37 and 40 percent over the next three years.

The hottest investment bets include companies engaged in desalination, recycling or infrastructure, which have the highest margins and potential profit growth. Utilities are less attractive, because water prices anywhere are usually regulated by the government and not subject to market conditions. Dieter Küffer, a senior portfolio manager with Sustainable Asset Management in Zurich—which has the second biggest water fund in the world, worth $1.6 billion—says: "We think earnings growth in water stocks overall will be 14 percent over the next five years, and Asian water-stock growth will be 50 to 100 percent.''

Investors pouring money into water funds may find, as they say in China, double happiness. The stocks themselves have had a good run. But investing in sustainability may have a larger payoff. Many economists now see environmental issues as the biggest stumbling block to continued fast growth in Asia. Already, Beijing estimates economic losses due to water shortages at $25 billion a year. Investors buying into liquid assets could help secure Asia's larger economic future.
© 2007 Newsweek, Inc.

URL: http://www.msnbc.msn.com/id/20226748/site/newsweek/

© 2007 MSNBC.com

Newsweek: Jaycee Chan

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Jaycee Chan (Jackie's Son) Finds His Rhythm
Jaycee Chan, Jackie's son, is set to become a film star with 'The Drummer.' But all he wants is to play music.

By Alexandra A. Seno
Newsweek International

Aug. 6, 2007 issue - Jaycee Chan was filled with apprehension. He was in a hotel room trying to film a love scene for his new movie, "The Drummer," and it wasn't going smoothly. "'Wah, with 50 people staring, how can I do the job right?' " he recalls thinking. He had already banished his famous father, Jackie, from the set; the action star was passing the time in the bar downstairs, singing karaoke. Eventually the younger Chan found his groove and aced the scene. "At first there was a lot of pressure," he says. "Now I don't care." But audiences will: Chan, 24, gives a mesmerizing performance in "The Drummer," in which he plays a crime boss's troubled son who is transformed by Zen drumming. "I think Jaycee is going to be a very, very good actor," says Hong Kong upstart Kenneth Bi, the film's director and writer. "He's got stuff going on."

That's putting it mildly. This summer Chan stars in no fewer than three major Asian films. In addition to the independent "The Drummer"— scheduled to premiere at Switzerland's Locarno International Film Festival in August—Chan plays a Hong Kong cop in "Invisible Target," a crowd-pleasing police thriller out this month. And he shows up as a young man having an illicit love affair during the Cultural Revolution in Jiang Wen's Venice Film Festival entry, "The Sun Also Rises." "Jaycee's friends couldn't believe this is the guy that they know," says Jiang, one of mainland China's most respected directors. "He gave a wonderful performance."

Chan manages to deflect comparisons to his father mainly by avoiding martial-arts roles. In fact, his first love is music. Growing up in Hong Kong, he would start dancing any time he heard a Michael Jackson song. As a teenager attending private school and then college in the United States, he wrote his own songs, and he eventually dropped out of the College of William & Mary in Virginia to return home and pursue a music career. More than anything, Chan, who plays drums, guitar and piano, thinks of himself as an aspiring recording artist. He readily admits that he plunged into the film industry three years ago because the Asian public expects singers to make movies (and actors to release CDs). Although he is delighted with the good reviews his acting has earned, the singing-idol wanna-be sees a downside: "Sometimes I feel I may be a better actor than a singer," he says wistfully.

Chan lives with his dad, and readily acknowledges that his genealogy has opened some doors. (His Taiwanese mother, Lin Feng-jiao, was a film star in the 1970s and 1980s.) "It's pretty nice having a dad like him," says Jaycee. Jackie, who also has a minor singing career, expects his son to make his own decisions and supports him but gives him space. The younger Chan is acutely aware that he'll have to deliver the goods if he wants to make it on his own. His film career began with roles in escapist commercial fare, like 2004's "The Huadu Chronicles," an adventure story. In 2005, Chan wrote the music for and starred in the drama "2 Young," a small film about a teenage relationship that first won him notice as a serious actor.

Bi wrote the script for "The Drummer" specifically with Chan in mind. He pursued the actor relentlessly for the pivotal role, even after an initial rejection. Bi, himself the son of Hong Kong movie personalities, finally won over the young star by selling him on how the role would push his boundaries. "We made him do things he had not done before," says the director. The film is set to be his breakthrough, the first time an entire movie has rested on his acting skills. For the part of the young urban thug on the run from Hong Kong mobsters, Chan—who speaks excellent Mandarin and Cantonese as well as very good English—threw himself wholeheartedly into full days of rigorous training with drummers near Taipei.

Despite good early feedback on "The Drummer," Chan clearly cannot wait to get back to composing songs. Though critics savaged his only recording attempt so far—a self-titled CD released in Hong Kong in 2004—Chan remains undeterred. He relishes the chance to express himself musically and loves the pressure of knowing that everything depends on him: the music, the lyrics, the vocals. Chan describes his style as "Mandarin alternative folk," something that he believes most locals simply don't get. But he is firm in his faith that his sound will have a following in Taiwan and China. He acknowledges that "it is different from the music in Hong Kong," where tastes tend to favor romantic ballads and processed pop songs with catchy hooks.

Chan, who is known in Cantonese as Fong Jo-ming, hopes to take a break from acting in a few months to finish that long-planned second album. Meanwhile, he is also busy running a small candy company called Rio Active Mints. He started it a few months ago with two friends from outside the entertainment industry. The venture suits him perfectly. "I want to do business because I want to try new things," says the singer-actor. And with that, the budding entrepreneur produces a small tin of the candies and passes them around.

© 2007 Newsweek, Inc.

URL: http://www.msnbc.msn.com/id/20011279/site/newsweek/

© 2007 MSNBC.com