After calling China’s crackdown, Strategic Vision goes big on solar

Bloomberg

One of the few funds to predict Beijing’s clampdown on education companies is doubling down on its bets on China’s solar companies.
Ken Xu, Hong Kong-based chief investment officer at Strategic Vision Investment Ltd, withdrew from tutoring stocks in March after noting that state-backed media outlets and policy makers were echoing angst among parents about the societal impact of the industry.
Now his flagship $350 million Value Multiplier Fund is wagering that China’s green ambitions will see renewable energy stocks extend their advance, despite a jump in valuations. The fund returned more than 200% in 2020, and is up about 35% this year versus a gain of just 1.1% for the HFRX China Index that tracks the performance of China-focused hedge funds.
Its top two contributors — Xinyi Solar Holdings Ltd and Sungrow Power Supply Co — are riding a “mega trend” that shows no signs of ending, whereas big online technology names like Alibaba Group Holding Ltd and Tencent Holdings Ltd are becoming less attractive, according to Xu. “The global internet is a good trend but it is a little bit mature now,” he said in an interview. “What we are actually more excited about is the energy revolution.”
Underscoring this point, the Hang Seng Tech Index dropped to near a record low while ride-hailing giant Didi Global Inc plans to delist from the New York Stock Exchange amid scrutiny from both American and Chinese regulators.
Xu expects solar power to account for as much as 60% of global electricity generation in the next 20 years, from just 3% last year. He also sees demand for solar energy and solar glass increasing as much as 30% and 45% per year, respectively, over the next few years. This will benefit Xinyi Solar, which makes solar glass, and Sungrow Power, which manufactures power inverters, he said.
Clean-energy has been a popular investment theme globally this year, evidenced by soaring share prices of electric-vehicle makers like Tesla Inc and solar companies including Enphase Energy Inc.