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Short of the Week: struggling water sector is target rich environment

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Thames Water, one of the biggest water utilities in the UK, has been demonstrating to investors that the water space is not a safe, defensive place to be at the moment. Early losses for listed water companies have accelerated as concerns about long term financial resilience across the industry have risen.

After largely shrugging off the crisis talks surrounding Thames Water, investors are reassessing the longer-term implications for other firms in the sector. So are short traders and hedge funds.

UK government ministers are - reluctantly - discussing a possible temporary nationalisation of Thames Water, as the company totters under its debt burden. Senior sources within the water industry tell me this is the legacy of privatising a sector that had little incentive for competition (have you tried changing your water provider in the UK?) but lots of incentive to pay management and shareholders.

With the strong possibility of a Labour government in the UK next year which may include further nationalisation of the water sector in its policy agenda, investors in water utilities are getting jittery, creating scope for some cheeky short trading in listed UK water stocks.


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