Chinese money managers are rushing to launch new energy funds, seeking to capitalize on investorsâ€™ green fever which has been fuelled by President Xi Jinpingâ€™s carbon neutrality pledge.
Chinaâ€™s first photovoltaic industry exchange-traded fund (ETF), launched by Huatai-PineBridge Fund Management Co in December attracted hot demand, with assets under management jumping nearly six-fold in just a month to 10 billion yuan ($1.55 billion).
A slew of mutual fund houses are following suit, with Yinhua Fund Management Co 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. Chinaâ€™s new energy index doubled last year, pushing up the sectorâ€™s earnings multiples to almost 90 compared with 22 for Chinese stocks broadly.
â€œRenewable energy is the only option for the human race in the combat against climate change,â€ said Richard Pan, portfolio manager at China Asset Management Co (ChinaAMC).
Pan, who made lucrative investments in battery maker Contemporary Amperex Technology Co (CATL) and solar equipment maker Tianjin Zhonghuan Semiconductor Co, said the governmentâ€™s green pledges and Chinaâ€™s strong competitiveness in new energy means the industry has much more room to grow.
President Xi has vowed to make China, the worldâ€™s biggest emitter of carbon dioxide, carbon neutral by 2060. The commitment will require more than $5 trillion of investment in renewable power and other sectors, consultancy Wood Mackenzie estimates.
Xi also pledged to raise wind and solar capacity to 1,200 gigawatts by 2030, more than double the current level.
Chinaâ€™s â€œenergy revolutionâ€ will boost solar power, said Kai Wenming, analyst at New Times Securities, who forecast a 67.3% capacity expansion this year.
Investors are also encouraged by the fact that technological advances helped slash solar production costs by 90% over the past decade, weaning the industry off government subsidies, said Liu Xiaoming, who will manage Tianhongâ€™s new photovoltaic fund.
Other funds preparing to launch solar energy funds include Harvest Fund Management Co, Guotai Asset Management Co, and Penghua Fund Management Co.
But soaring stock prices are fuelling fears of a bubble, with Chinaâ€™s new energy index already jumping over 8% in the first two trading days of 2021.
â€œThe sectorâ€™s prospect is bright, but valuation is too high,â€ said Stephen Huang, vice president at Shanghai See Truth Investment Management Co, a hedge fund house.
â€œWeâ€™re seeing too much exuberance.â€
Source: Reuters (Reporting by Samuel Shen and David Stanway; Editing by Ana Nicolaci da Costa)