Chinese fund managers rush to capitalise on investors' green fever

SHANGHAI (REUTERS) – Chinese money managers are rushing to launch new energy funds, seeking to capitalise on investors’ green fever which has been fuelled by President Xi Jinping’s carbon neutrality pledge.

China’s first photovoltaic industry exchange-traded fund (ETF), launched by Huatai-PineBridge Fund Management in December attracted hot demand, with assets under management jumping nearly six-fold in just a month to 10 billion yuan (S$2.04 billion).

A slew of mutual fund houses are following suit, with Yinhua Fund Management raising money for a rival product this week while Tianhong Asset Management Co plans to launch an index fund that invests in solar power companies next Monday. More green energy funds are in the pipeline.

The funds will likely bring more money into an already red-hot sector. China’s new energy index doubled last year, pushing up the sector’s earnings multiples to almost 90 compared with 22 for Chinese stocks broadly.

“Renewable energy is the only option for the human race in the combat against climate change,” said Richard Pan, portfolio manager at China Asset Management Co (ChinaAMC).

Mr Pan, who made lucrative investments in battery maker Contemporary Amperex Technology (CATL) and solar equipment maker Tianjin Zhonghuan Semiconductor, said the government’s green pledges and China’s strong competitiveness in new energy means the industry has much more room to grow.

President Xi has vowed to make China, the world’s biggest emitter of carbon dioxide, carbon neutral by 2060. The commitment will require more than US$5 trillion (S$6.59 trillion) of investment in renewable power and other sectors, consultancy Wood Mackenzie estimates.

Mr Xi also pledged to raise wind and solar capacity to 1,200 gigawatts by 2030, more than double the current level.

China’s “energy revolution” will boost solar power, said Kai Wenming, analyst at New Times Securities, who forecast a 67.3 per cent capacity expansion this year.

Investors are also encouraged by the fact that technological advances helped slash solar production costs by 90 per cent over the past decade, weaning the industry off government subsidies, said Liu Xiaoming, who will manage Tianhong’s new photovoltaic fund.

Other funds preparing to launch solar energy funds include Harvest Fund Management, Guotai Asset Management and Penghua Fund Management.

But soaring stock prices are fuelling fears of a bubble, with China’s new energy index already jumping over 8 per cent in the first two trading days of 2021.

“The sector’s prospect is bright, but valuation is too high,” said Stephen Huang, vice president at Shanghai See Truth Investment Management, a hedge fund house. “We’re seeing too much exuberance.”

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