China’s EV, solar stocks have more room to run, say funds

Bloomberg

Some of the world’s biggest money managers say the strong rally in China’s renewable energy stocks has more legs, citing the sector’s rosy earnings prospects and policy support.
BlackRock Inc, Aberdeen Standard Investments Ltd and UBS Global Wealth Management are among those backing investments in Chinese electric vehicle-related companies and solar firms. Their endorsement comes as the world’s largest battery maker Contemporary Amperex Technology Co and major solar producer LONGi Green Energy Technology Co hit record highs this week after surging more than 40% each in the last quarter.
Global funds are upbeat because of China’s continued dominance in global EV battery and solar panel production, and the nation’s supportive industry policies serving its ambitious goal of reaching carbon neutrality in 2060. International expansion by key players is among other reasons for their optimism.
Chinese companies are increasingly threatening the EV market share of Tesla Inc, which has captivated much of the investment world’s imagination until recently. Tesla slid nearly 4% during the first half of the year even as other automakers surged ahead. “It’s a structural, long-term growth story that investors are prepared to pay up for today,” said James Thom, an investment director at Aberdeen Standard. “The anticipated uplift in renewable energy capacity over the next five years under the latest ‘five-year plan’ is sufficient to justify current valuations,” he added, referring to Beijing’s blueprint for economic and social development through 2025.
EV makers are entering a “golden age,” with global sales expected to surge 76% this year amid supportive policies in Europe and the US, as well as increased “high-quality” supply from China, Essence Securities Co analysts wrote in a note. The Chinese brokerage recommends investors stay overweight the sector.
Shares of US-listed Chinese EV manufacturers have climbed more than 60% since their lows in mid-May, supported by signs of robust demand growth. Among them is Xpeng Inc, which is slated to start trading in Hong Kong on July 7 after raising $1.8 billion in a so-called homecoming share sale. As prices of materials from lithium to polysilicon have risen, the rally has extended to suppliers.