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After calling for a crackdown on China, the fund is growing on solar – EQ Mag Pro

After calling for a crackdown on China, the fund is growing on solar – EQ Mag Pro

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One of the few funds predicting Beijing’s crackdown on education companies is doubling bets on Chinese solar power companies.

Strategic Vision Investment Ltd. Hong Kong-based chief investment officer, Ken Xu, found in March that state-sponsored media and policy makers were worried among parents about the social impact of the industry. I stopped teaching.

Today, his flagship product, the $ 350 million Value Multiplier Fund, hopes that China’s green ambitions will expand the advancement of renewable energy stocks, despite soaring valuations. increase. The fund returned more than 200% in 2020, up about 35% this year, while the HFRX China Index, which tracks the performance of hedge funds focused on China, is up only 1.1%.

Xinyi Solar Holdings Ltd, a contributor to the top two companies. And Sungrow Power Supply Co. are on a never-ending “megatrend”, but Alibaba Group Holding Ltd. And Tencent Holdings Ltd. The names of major online technologies such as are decreasing. According to Xu, it’s fascinating.

“The global internet is a good trend, but it’s a little mature now,” he said in an interview. “What is really more exciting for us is the energy revolution.”

Emphasizing this point, the Hang Seng Tech Index fell to record lows on Friday, and ride-haling giant Didi Global Inc. traded on the New York Stock Exchange under the supervision of US and Chinese regulators. We are planning to delist from the stock exchange.

Xu expects solar power to account for 60% of global electricity generation over the next 20 years, up from just 3% last year. He also expects demand for solar energy and solar glass to increase by 30% and 45% annually over the next few years, respectively. He said this would benefit Xinyi Solar, which makes solar glass, and Sungrow Power, which makes power inverters.

Clean energy is a globally popular investment theme this year, as evidenced by the soaring stock prices of electric vehicle manufacturers such as Tesla and solar power companies such as Enphase Energy. Amperex Technology Co. To Li Auto Inc., a new energy vehicle manufacturer.

China’s new energy sector was boosted by Beijing’s commitment to achieve net zero emissions by 2060. It also benefits from the outflow of money from the technology, education and real estate industries as the government tightens regulations.

Still, there are challenges. China’s solar product prices have recently fallen due to easing demand, according to Citigroup analysts, while Invesco ETFs, which track the gauge of the global solar industry, have fallen about 16% this year. I am.

Xu also identified biopharmacy, new materials, and automotive software as having great potential to create stock winners. The global shortage of batteries and related equipment, and the growing demand for these products, is the Wuxi Lead Intelligent Equipment Co. He said he should support companies like. Wuxi Lead surged about 55% this year.

His confidence in renewable energy stocks comes from some investors regaining their stakes. Xinyi Solar fell about 25% from its peak in August, and Sungrow fell about 11% after reaching a record high in October. Following the recent sale, Xinyi is one of the worst performers in this year’s Hang Seng Index, but Sungrow is still more than doubled.

Crackdown play

Mr. Xu sold the education companies New Oriental Education and Technology Group Inc. and TAL Education Group due to regulatory concerns, but saw the real estate industry’s problems providing a good entry point for real estate services stocks such as Country Garden Services Holdings. ing.

Beijing’s scrutiny of the sector actually paves the way for major companies to gain more market share, as there are many SMEs in this sector that charge high fees and offer poor services. Said Mr. Xu.

Regarding internet giants like Alibaba and Tencent, he said: In the future I would like to focus on the winner. ”

Source: Bloomberg

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Anand Gupta Editor - EQ Int'l Media Network