Financial Profiles | Trends and Technologies

Investors who counted China down and out at the onset of the crash of 2008, ought to take a look at the Hang Seng Index, which has rallied around 35% since early March. As a long time China watcher, I think the comeback was to be expected.


So where will the next big growth sector be as China gets back on track?


News out of Hong Kong today that Entropy Ventures Ltd, a private equity fund that invests in green projects, expects a rebound in investment flows into Asia's clean energy sector in the second half following a dearth of deals since last year's credit crisis.


Sylvia Chan, managing director of Entropy, said optimism among private equity funds was underpinned by governments’ push for clean energy and efficiency programs.

China’s dramatic growth over the past 20 years has come at a huge cost, in terms of pollution. Areas such as Guangdong Province barely ever see the sun through the smog, groundwater is so badly polluted it’s undrinkable. The Chinese government wants that to change and have targeted stimulus initiatives to that end.


According to Chan, former head of utilities at Australian investment bank Macquarie Group, "The drivers at play are green jobs and green industries, and these are things that will support a three-year growth trajectory for the sector.”


Tight capital and slowing economies have hindered growth in the industry, trimming the size and number of deals clinched in the first half.

But that's about to change in the coming months, she said.


Most investors have taken a wait-and-see approach. But that's changing, and certainly investment flows will pick up in the second half, Chan said.


Entropy's $100 million fund, launched last year, has so far invested in Solar and Environmental Technologies Corp Ltd and Horizon Fuel Cells Technologies, both of which are based in China.


The fund aimed to invest in about 10 more companies by 20-11. About half of the fund would go to China projects, she said.


Hong Kong-based Entropy also planned to raise a second fund, Chan said, although she declined to give details.


For now, private equity funds remain cautious, avoiding capital-intensive sectors such as the once-hot makers of thin film used in solar energy panels.


According to Chan people are more interested in energy efficiency and storage because they are less capital-intensive and they are seeing governments, including the Americans, becoming more supportive of that.


Renewable energy, waste management, green batteries and smart grids are some of the other areas Entropy is eyeing. Smart grids promote the use of intelligent meters to monitor electricity use.


On Friday, Chinese Cleantech shares rose after China's Ministry of Finance announced measures to support cleantech and the environmental protection industries. On the list— ten areas to support, including windpower, solar photovoltaic generation and energy efficient cars.


Xinjiang Goldwind Science and Technology Co. which just won windpower contracts of 775.5 thousand KW, advanced 1.41 percent. Dongfang Electric Corporation Limited climbed 0.05 percent. Guangdong Baolihua New Energy Stock Co. added 3.97 percent.


Shenzhen Topraysolar Co. China's largest monocrystal line siliconproducer, rose 5.26 percent. Hubei Sanxia New Building Materials Co. which has the largest silicon deposits in south China, surged to the 10 percent trading cap. China Singyes Solar Technologies Holdings Limited surged 10.47 percent.


Battery and hybrid car developer BYD Company Limited climbed 3.85 percent. Warren Buffet invested in the company last year.


Tibet Mineral Development Co. which has the  world's third-largest deposit of lithium, for batteries, added 2.76 percent. China-Kinwa High Technology Co. which produces half of China’s copper foil used in lithium batteries, advanced 6.52 percent.


Jiangsu Guotai International Group Guomao Co. China’s largest producer of lithium battery electrolyte, climbed 0.34 percent.


There are two major stock exchanges in mainland China, Shanghai and Shenzhen. There are four basic types of shares: state shares, legal person shares, individual shares, and foreign capital/person shares.


Foreign capital shares include B shares and oversea-listed shares. B shares are publicly traded Chinese stocks in which foreign investors are permitted to invest. H shares refer to shares floated and listed on the Hong Kong Stock Exchange, N shares are issued as ADRs on U.S. stock exchanges; and L shares are issued on the London Stock Exchange.


Your financial advisor will have all the details.



While Cleantech globally will provide outstanding investment returns as world economies return to growth, Chinese cleantech deals look to be among the most exciting. A low cost structure, combined with powerful global and domestic demand, as well as the strength of Hong Kong Chinese financial backing and administrative facilities, the Chinese Cleantech sector could turn out to be one of the most exciting plays ever.


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