Analysis: China's water sector policy is still good

Abstract: On the 1st of the month, Xinhuanet officially announced the full text of No. 1 document. Although this year's No. 1 document is not focused on water conservancy construction, No. 1 document still emphasizes the strengthening of irrigation and water conservancy construction, and accelerating the construction of water source projects. It proves that the Chinese government's policy on water conservancy construction is still good. Last week, the water conservancy stocks also performed well.

Looking back, it is recommended to pay attention to the policies that will be introduced in the near future to solve the problem of water conservancy construction funds, including: 1) The Ministry of Water Resources and the Ministry of Finance will jointly issue the Central Government’s management methods for land transfer proceeds, and all localities shall also strengthen the overall planning at the provincial level. 2) The People's Bank of China and other 7 departments will soon issue opinions on further reforming and developing financial services for water conservancy, encourage and support qualified local government financing platform companies to expand water financing channels through direct and indirect financing, and actively develop BOT and TOT. BT and other new water projects financing model. The introduction of these two policies will effectively ease the issue of funding for water conservancy construction.

According to CICC, under the current stock price, the average PE of the A-shares construction sector in 2011 and 2012 was 13.5 and 11.4 times. The average of the four leading companies in 2011 and 2012 was 9.6 and 9.0 times. The short-term is still concerned about the related policies of the water conservancy sector. The trading opportunities for water conservancy stocks; In the long term, China Construction (China) is still optimistic about the steady growth of its performance, as well as the China Construction International and China Communications Construction of Hong Kong stocks.

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