Investors should favor shares of Chinese solar companies and avoid developers as the government promotes cleaner forms of energy and maintains property curbs to restrain prices, Shanghai Elegant Investment Co. said.
“China’s shift away from energy-intensive and polluting industries to a low-carbon economy is one of the key investment opportunities in the next three years,” Shi Bo, who oversees about $400 million as general manager of Shanghai Elegant, said in a phone interview today. He declined to say if he’s buying or selling stocks.
China, the world’s biggest polluter, is striving to reduce its reliance on growth driven by energy-intensive industries and avert asset bubbles after stimulus spending and record loans last year fueled a jump in property prices. The nation may spend about 5 trillion yuan ($738 billion) in the next decade developing cleaner sources of energy, Jiang Bing, head of the National Energy Administration’s planning and development department, said in July.
Shi, whose fund beat 98 percent of China-domiciled funds in the past year according to data compiled by Bloomberg, said China’s economy is a transitional phase. “You have to invest in sectors that the government is advocating.”
A measure tracking Chinese property stocks has slumped 25 percent this year, the most among the Shanghai Composite Index’s five industry groups, as the government limited lending and restricted multiple-home purchases to cool property prices that rose a record 12.8 percent in April. Vice Premier Li Keqiang this month urged local officials to accelerate construction of public housing.
“The property sector will face increased public housing supply and is vulnerable to further measures if prices don’t decline,” Shi said.
The property stock gauge has rebounded 11 percent since this year’s low on July 1, helping drive gains in the broader index, as China’s cooling economy spurred speculation the government will ease property curbs and relax lending targets.
“A slowdown in economic growth in the second half has raised expectations the government may loosen policy,” Zhang Dongyun, Shanghai-based strategist at Haitong Securities Co., the country’s second-largest brokerage by market value, said in a report this week. Zhang said investors should buy the nation’s stocks on “near-term pull-backs.”
China’s industrial output rose the least in 11 months in July, while retail sales growth eased and new loans climbed less than estimated. Gross domestic product growth dipped to a 10.3 percent annual pace in the second quarter from 11.9 percent in the first three months of the year.
Baoding Tianwei Baobian Electric Co., which has units making solar panels, has declined 21 percent this year. Wuhan Linuo Solar Energy Group Co., the manufacturer of solar energy conversion materials, has lost 20 percent. That compares with a 20 percent drop in the Shanghai Composite.