Carbon neutrality focus buoys A shares

The country's long-term goal to achieve carbon neutrality has been mirrored in the A-share market performance, with stock prices of carbon neutrality-related companies rising by an average 4.07 percent on Monday, while the benchmark Shanghai Composite Index gained 1.14 percent to close at 3443.44 points.

Prices of carbon neutrality-related Shenzhen Energy Corp, Jilin Electric Power Co Ltd and Beijing Jingyuntong Technology Co Ltd increased by the daily limit of 10 percent. Steelmaker Beijing Shougang Co Ltd, which was recently surveyed by the country's social security fund, a long-term value investor, also saw its price hit the daily ceiling of 10 percent.

Analysts from Industrial Securities said in a report that carbon neutrality will lead to an upgraded version of supply-side reform in China. While the country's goal to cut greenhouse gas emissions indicates opportunities for environmental protection industry, small and medium-sized enterprises in the energy-intensive industries will be forced out of the market due to stricter environmental protection regulations.

In other words, manufacturers such as steel or coal enterprises will see their costs further escalate. Industry leaders, especially those in the mid to upstream of the value chain, will be preferred by investors thanks to their stronger capability to control energy consumption, according to Industrial Securities analysts.

Hydrogen-fueled cars may see more development in China given their high efficiency and low emissions. Domestic carmakers and component manufacturers have rich technology development and operational experience in this aspect, which points to opportunities for investors, said Ping An Securities analysts.

Experts from CITIC Securities are of the view that investors should look for opportunities in sectors where local governments can come up with specific development plans. Wind power, for example, may see detailed development plans from Beijing and follow-up guidelines in different provinces and cities. Investors can look for opportunities in this area. Meanwhile, green logistics, natural gas and new energy vehicles may also be good investment targets, they said.

During the three-day China Development Forum that started in Beijing on Saturday, Zhang Lei, CEO of private equity firm Hillhouse Capital, said China may need hundreds of trillions of yuan as investment to achieve its carbon neutrality goal, a large part of which will be contributed by private equity and venture capital firms. According to the technology roadmap of carbon neutrality, Hillhouse Capital has already invested throughout the industrial chains of photovoltaic, new energy vehicles and chip industries, he said.