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  • Investments In China Energy Sector Now And Beyond 0 comments
    Mar 16, 2013 7:54 AM

    The Chinese Government is upbeat on encouraging private investment and stakes in the domains of energy production and power distribution, so is the sector equity which may see healthy cash flows in the current fiscal year and beyond. Streets are betting heavy on the fact that de regularisation of the state owned energy majors will unleash considerable gains for the stake holders. The clear winners for investing in the China energy sector are the govt. owned stocks which will unlock considerable value post regularization and aggressive development in the renewable energy area where both private and public players are vesting millions of dollars in the hydro electric and wind energy projects. Solar Power too is a priority on State Energy Policy and the related equity is all the more attractive now owing to the bottomed-out prices they are available at.

    Foreign Investors inclined towards the asset class must take a closer look at China Energy ETFs for their wide spectrum portfolios are more risk tolerant than the direct equity investments. Moreover these funds are traded on spot prices and can be tracked real time through valid indices that they follow.

    China is the top user of energy in the world ahead of United States. Its huge human resources, a high rate of urbanization and industrialization has made it the foremost BRIC nation with an average economic growth of 9.5% over the last decade. The country is now actively promoting private money to enter the energy sector in the search and development of resources, building of natural gas pipeline and power industry, meting out of coal, purifying and refining oil. The clear emphasis is also on developing cleaner and renewable sources of energy (wind, solar and water) and the space has seen a considerable amount of foreign private investments in the renewable area of hydropower, (most notable in recent times is Zhaoheng deal). Hydropower along with Wind and Solar energy has great capacity for growth in these parts of Asia and think tank of the nation is determined to reduce the economic dependence on fossil fuels.

    The Government plans to increase the use of non-fossil fuels to 11.5% from the existing consumption of 8.55% as the high coal dependency can cause obstruction in China's green endeavours for the interim period between the years 2011 and 2015.

    A lenient regulatory structure which empowers the private players will notably alter the equations involved in the production of coal, oil and gas which are a very lucrative business in the country. A lesser control of state and more incentives for private investors will lead to a steady progress in the power sector's infrastructure and will also have a direct and healthy impact on economic growth. It is only logical to fathom that a timed investment in China Energy ETFs and selective equity will beget profits in wake of a positive outlook.

    The synergy can be tapped through Equity Traded Funds [ETFs] which are fairly transparent products in the manner that the fund issuers publish the fund asset list on a day to day basis, the diversification achieved is healthy too. China energy ETF can prove to be a secure investment even in an inflation scenario without taking the complex route and paying numerous commissions which come with acquiring different stocks, an ETF can add many companies (say 20 or even more) to a portfolio with one simple deal.

    Global X China Energy ETF [CHIE] delivers as per the performance of The Solactive Global China Energy Index after the annual expenses of 0.65%. Invest China Energy sector as it closely follows the benchmark and its +24 securities which more or less cover most major companies form the Sino Energy world. The issuers are also upbeat since they posted Global X China Energy Fund 2012 returns as 16% if bought at NAV.

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