As one of the fastest-growing emerging countries, China is driving social change and industry structural transformation with steadfast political determination. For example, industries such as green energy, advanced manufacturing, core technologies and high-quality commodities that are in line with China’s social-economic transformation continue to prosper. In addition, the coronavirus pandemic has unmasked the strength of China’s supply chain. Coupled with eased U.S.-China relations and lowered market risks, it should be no surprise if the market is optimistic about investment in China. However, Victory Securities found that the risk preferences for China market have not increased accordingly in Hong Kong investment market, which expect to translate into tremendous potential for growth in China market in the future.
Mr. Zhou Wu, Senior Portfolio Manager at Victory Securities Asset Management Department said, “We are very optimistic about the investment opportunities brought by carbon neutrality. According to a survey conducted by us, investment in the carbon neutral industry has entered a period of high growth since the second half of 2021 — last year, investment in the primary market reached a record high in just half a year.”
At the Boao Forum for Asia Annual Conference 2022, Liu Qiao, Dean of Guanghua School of Management, Peking University, pointed out that achieving carbon neutrality requires tremendous investment. According to the estimation by a research group at Guanghua School of Management, the investment required to achieve carbon neutrality could amount to RMB 250 trillion in the coming 30-40 years. According to the forecast by institutions such as CICC, investment required to achieve carbon neutrality is about RMB 140 trillion.
Mr. Zhou believes that “the most profound change brought about by carbon neutrality is the transformation of energy industry from a resource industry to a manufacturing industry. The global energy industry chain and industry norms will be reshaped. Such clean energy as photovoltaics and wind power will gradually replace traditional energy. With the decline in use of traditional energy resources, energy dominance can no longer be maintained by countries with fossil fuel reserves, but by countries with superiority in related manufacturing industries. At the same time, the simultaneous and rapid global carbon reduction movement has deprived late-coming countries of relatively cheap fossil fuel energy resources for the development of their manufacturing industries. The barriers to enter into the manufacturing industries have been raised significantly. China’s strength in manufacturing industries has been strategically extended, and it continues to expand. Now China has achieved not only independent supply, but also global superiority in photovoltaic and wind energy industries. There is huge potential for growth.”
Meanwhile, the timetable for major countries to phase out fossil fuel vehicles are driving the rapid development of the electric vehicle industry. Victory Securities predicts the industry has entered a period of demand-driven, explosive development. The automobile industry chain has been redefined — the patent barriers on traditional vehicles and their core components are being circumvented, while the electric vehicle battery industry chain and automotive intelligence have become new core technologies. This is also a strategic opportunity for China. Not only can China curb its oil import dependence and foreign patent barriers on automobiles, but also consolidate and harness its strength in manufacturing. Victory Securities shares the thought that China has achieved not only independent supply, but also global superiority in new energy and new energy vehicles. And the company alerts investors to pay attention on the Hong Kong stock market, as it is common to find high-quality yet fairly valued stocks in these thriving industries.
Moreover, Mr. Zhou has observed that “industries, which have long-term development strength, such as online platforms, medical care, culture and entertainment have returned to the bottom price band due to government policies adjustment. In particular, online platforms and biotechnology, due to their scarcity in the Hong Kong stock market, have entered the middle price band.”
For more information about the investment opportunities in global stock markets, please visit Victory Securities’ website at www.victorysec.com.hk.
Disclaimer
This content should not be regarded as a basis for an offer, solicitation, an invitation, recommendation to buy or sell any investment product or investment decision, nor should it be construed as professional advice. Before making any investment decision, investors should take into account their own circumstances including but not limited to investment objectives, investment experience, financial situation and particular needs. The information and materials contained on this report are not and are not intended to provide professional investment or other advice. Investors should understand the nature, terms and risks of the relevant investments and refer to the relevant offering documents, and obtain appropriate professional advice (where necessary), before making any investment decision.
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