The Company NAV rose 2.1% over the month, whilst the MSCI AC Asia Pacific ex Japan Index (£) rose 0.6%, the FTSE Environmental Opportunities Asia Pacific ex Japan Index (EOAX) (£) fell 1.0% and the FTSE Environmental Opportunities Japan Index (EOJP) (£) rose 4.6%. The cash level at the end of the month was 1%.
Global markets rose in November on the back of the announcement of a second round of quantitative easing in the US. However, most markets failed to hold on to their gains into month end as fears of tightening in China in response to rising inflation, Ireland's decision to seek a rescue package from the EU and concerns in Europe about the potential losses that bond holders might face in future sovereign rescue packages led to a decrease in risk appetite. Towards month end markets were unsettled further by a unprovoked attack by North Korea on a South Korean Island. The major exception was Japan, where the market advanced due to a reversal in the strength of the Yen, reducing the negative headwind for exporters.
The UNFCCC climate summit in Cancun started with relatively low expectations of progress towards reaching a binding global treaty. Prominent developing country polluters have announced plans of ambitious future environmental policies, with China and South Korea planning domestic carbon trading schemes and resource and carbon taxes, whilst Brazil is to ban the build-out of new fossil fuel plants after 2014. In other news, India launched its REC trading program, with generators receiving one RE certificate for each 1MWh of renewable power injected to the grid. Taiwan will announce FiTs for renewables for 2011, whereas South Korea plans to invest $8.2bn in offshore wind by 2019. Both India and China have announced further incentives to encourage the use of, and investment in, electric vehicles.
In Alternative Energy & Energy Efficiency, the announcement that China's new Five Year Plan would target the electric vehicle, industrial energy efficiency and light emitting diode ("LED") sectors further boosted the energy efficiency space, with Zhuzhou CSR (transport energy efficiency, China) strong in anticipation that the plan would result in an acceleration in rail investment. Other strong energy efficiency stocks were China High Precision, on expectations of strong 2011 revenue growth, Delta Electronics (industrial energy efficiency, Taiwan) on expanding margins, and Murata (industrial energy efficiency, Japan) as earnings beat expectations driven by an improving operating margin and a subsequent raising of full year guidance. Wind stocks were particularly weak on a general lack of orders and negative sector sentiment. Those that performed poorly included China Longyuan (wind IPP, China), which fell on anticipation of domestic interest rate increases and China High Speed (wind equipment, China) on fears that pricing pressure will increase as turbine manufacturers attempt to pass cost pressure along the value chain. One renewable energy stock to buck the trend was Aboitiz Power (hydro and geothermal IPP, Philippines), which was strong on the expectation that electricity prices will remain at elevated levels due to a prevailing supply shortage.
In Water Treatment & Pollution Control, Japanese stocks Kurita Water (water treatment equipment) and Torishima Pump (water infrastructure) performed well, the former on profits that beat expectations and the latter as investors bought low price to book Yen sensitive companies as the US dollar strengthened. Chinese water stocks Sound Global (water infrastructure, China) and Beijing Enterprises (pollution control, China) were more typical performers, both falling, the first because its new BOT business model has been slow to gain traction and the second on price cap concerns.
In Waste Technologies & Resource Management, SIMs (metal recycler, Australia) performed well as the company decided to use its balance sheet strength to carry forward accumulated inventory (rather than force the volume onto a weak market) whilst Transpacific Industries (diversified waste management) Australia fell as management indicated that the commercial vehicle division would face a year on year headwind in the second half due to expiring car subsidies.
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