NEW YORK (Reuters) - Record heatwaves in Europe and Asia this summer are leading fund managers to buy shares of air conditioning manufacturers, betting that the public health risks of rising temperatures will compel businesses and apartment building owners to install cooling systems.

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Shares of Johnson Controls International Plc, United Technologies Corp, and Ingersoll-Rand Plc, are all up 25% or more since the start of the year, well above the 19% gain in the U.S. benchmark S&P 500 index. Those gains come despite concerns about slowing global economic growth due to the lingering trade war between the United States and China that have weighed on the industrial sector.

Japanese companies Daikin Industries Ltd and Hitachi Ltd are also up strongly year-to-date.

Fund managers and analysts say the recent outperformance will likely continue due to the necessity of cooling systems as temperatures rise globally. Paris hit 42.6 degrees Celsius (108.7 Fahrenheit) in July, the highest in the city’s recorded history, while Britain reported its hottest July on record. Heat waves contributed to the deaths of 1,435 people in France this summer, the country’s health ministry said Sunday.

“This is an issue that isn’t going away and it will certainly continue to drive adoption” of air conditioning in regions that traditionally have not relied on it, said Rob McIver, a portfolio manager at Jensen Investment Management. McIver owns shares of United Technologies, which is spinning its Carrier business off into a separate company, expected to become independent next year.

Europe will likely be a large growth market despite the outsized costs of retrofitting older buildings with new cooling systems, said Nicholas Heymann, co-group head – global industrial infrastructure at William Blair. Currently, only about 20% of European households have air conditioning, compared with 87% percent of U.S. households and 90% in Japan, due in part to greater emphasis on less energy-intensive forms of cooling in Europe.

“It’s something that’s structurally more challenging in Europe, and conceptually too, because Europeans tend to be more environmentally-conscious. But personal safety is going to be a bigger issue and they are going to have to come to terms with retrofitting,” he said.

That market would likely be particularly lucrative for Johnson Controls International, where cooling systems make up approximately 50 percent of its revenues and it has a lead in so-called mini-split systems, which do not require expensive ducts to send cool air through buildings, Heymann said.

The number of European households that buy and install a new air conditioning system will increase by an average of 4.3% a year through 2040 as more people move to cities, according to a study published in Environmental Science & Policy in July. Overall, global air conditioner sales will increase by 700 million units by 2030 and 1.6 billion by 2050, driven mostly by sales in developing countries such as India, according to estimates from the U.S. Department of Energy.

A slowdown in new construction in Asia, which has accounted for the majority of the sector’s growth, would likely weigh on the shares of air conditioning makers overall, said Noah Kaye, a senior analyst at Oppenheimer. Yet that could make companies such as Johnson Controls, which has seen its trailing price-to-earnings multiple jump nearly 72% over the last year, more attractive on a valuation standpoint, he said.

“There is a real opportunity here that’s under the radar” if Europe begins to adopt greater usage of air conditioning than its historical trends, Kaye said. “The use of air conditioning begets more air conditioning, and that’s a trend we see continuing as the world gets hotter.”