Clean power offers safety to China investors rattled by tariffs

[NEW YORK] China’s clean power generators are emerging as a safe haven for investors amid trade war turmoil.

Wind generator China Longyuan Power Group and hydro-dam operators China Yangtze Power and Huaneng Lancang River Hydropower are three of just 20 firms on the CSI 300 whose shares are up since the start of trading on Monday (Apr 7). The index as a whole is down 6.2 per cent over the past two sessions.

Investors traditionally turn to utilities during times of market upheaval thanks to their relatively stable revenue sources. Clean power generators have the added benefit of low-cost, tariff-free inputs such as sunshine, wind and water, and Chinese developers rely mostly on domestic supply chains to build out solar, wind and hydro plants.

“The China power sector remains one of the most defensive, and we prefer hydro to other power operators given lowest generation costs, valuation support and decent fundamentals,” Jefferies analysts Alan Lau and Johnson Wan said in a research note on Tuesday.

Chinese power utilities do face some headwinds. Electricity demand growth slowed significantly over the first two months of the year, a trend that could be exacerbated if US tariffs cause export-oriented factories to shutter. That could particularly weigh on coal power generators, whose fuel is relatively more expensive even after a recent price drop, according to Jefferies. BLOOMBERG