Renewable energy stocks a possible haven from China’s regulatory crackdown on big tech, private tutoring sectors, say analysts

Gauges of wind and solar energy stocks have reached levels unseen since the start of 2016 as traders rotate into policy-friendly stocks

That contrasts with a dramatic slump in after-school education firms and technology bellwethers, which have been pummelled by Beijing’s crackdown

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An engineer conducts maintenance work at a floating solar farm in Huainan City, in east China’s Anhui Province. Photo: Xinhua

Published: 7:30am, 9 Aug 2021Updated: 7:30am, 9 Aug 2021

Beijing’s regulatory assault on big tech and the off-campus education sector in recent weeks has led to a market rout as panic-stricken investors pulled their money from stocks vulnerable to policy risk.

For investors looking to move their capital into safer bets that – at least, so far – remain unscathed by the regulatory turmoil, the renewable energy sector could prove to be the answer, according to analysts.

“The policy risks to the internet and education sectors remain and are continuing to develop. On the other hand, there will be continued policy support for the renewable energy sector, which will remain an important industry to be developed in China over the coming years as part of China’s 14th five-year plan,” said Stanley Chan, director of research at Emperor Securities. “The policy risks for the sector are low, with good and stable business performance. “Investors can’t go very wrong by putting their capital into renewable energy stocks, which still have room to appreciate. This sector should be attractive for investors on the hunt for companies with good earnings in industries backed by policy support.”

Chan recommended key players in the clean energy sector such as Xinyi Solar, which recently became a blue chip constituent of the Hang Seng Index, and China Longyuan Power Group, the country’s largest wind farms developer.

UBS, Morgan Stanley and Manulife Investment Management also pointed to the renewable energy sector as a way of skirting regulatory risks.

Gauges of wind and solar energy stocks have this month reached levels unseen since the start of 2016, as traders rotated into policy-friendly stocks to dodge the minefield of regulatory risks. Analysts believe the sectors have more room for growth.

The wind power industry is expected to “maintain a long-term boom”, underpinned by China’s push for carbon neutrality by 2060 and recent support from the International Renewable Energy Agency (IRENA) for the development of offshore wind, Eastmoney Securities analyst He Wei said in a report on August 3.

IRENA said that offshore renewables, including wind and floating solar photovoltaic systems, would be critical to accelerating the energy transition of G20 countries in a report on July 23.

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