HSBC (HBC) has launched the HSBC Optimised Global Water Index, and plans to bring out a number of investment products pegged to the concentrated global water benchmark. The HSBC Optimised Global Water Index is a modified market-cap-weighted index comprising a maximum of 20 stocks. It exists in two versions: the Global Water Total Return Index, which includes ex-dividend adjustments; and the Global Water Price Return Index, which excludes the effects of dividends.
Index holdings must be available to foreign investors and have a minimum average daily traded value over three months of $1 million. Index companies must be engaged in water and water-related businesses including water collection, storage, purification, distribution, metering, desalination and sanitation, but it is not a pure-play index, as companies whose business is closely linked to water usage are also eligible.
The new HSBC water index is in line with HSBC's larger initiatives in the index sector, where the bank has been among the most active index providers in creating new benchmarks to track climate change and related global natural resource issues.
Water indexes have found recent favor among ETF providers, among the general uptick of index exchange-traded funds with global natural resource and energy market themes. A big part of these ETFs' marketing has also been the rhetoric of the demographic challenges across the globe as the world population expands against a finite set of natural resources.
Any ETF to launch based on the new HSBC water index would be a rival for the four existing water ETFs. Invesco PowerShares Capital Management, First Trust Portfolios and Claymore Securities offer the industry's first four water funds. PowerShares offers two water ETFs—PowerShares Global Water Portfolio (NYSE: PIO) and PowerShares Water Resources Portfolio (NYSE: PHO). The other two water ETFs are the First Trust ISE Water (NYSE: FIW) and the Claymore S&P Global Water (NYSE: CGW).
Performance of the water ETFs hasn't been half bad either (see story here).
PIO is based on Hydrogen Ventures' Palisades Global Water Index and PHO on the Palisades Water Index. FIW is benchmarked to the International Securities Exchange's Water Index, and CGW to the S&P Global Water Index. An HSBC Optimised Global Water Index ETF would most closely compete with PIO and CGW, the global water funds.