In order to cope with worsening fog and haze weather in cold winter, many places across the country including Beijing, Tianjin and Hebei province introduced environmental protection and output restriction policy. Air pollution in China has drawn attention from the public as well as capital market in recent years.
More than 80 percent stocks related to environmental protection surged yesterday. Among them, Zhejiang Kaier New Materials Co., Ltd. saw the biggest growth with 6.47 percent, followed by Harbin Dongan Auto Engine Co., Ltd. up by 5.87 percent and Suzhou Kingswood Printing Ink Co., Ltd. up by 5.44 percent. In addition, Jiangsu Huahong Technology Co., Ltd. (up by 4.69 percent), Dayu Water-saving Group Co., Ltd. (up by 4.69 percent), Meinian Onehealth Healthcare Holdings Co., Ltd. (up by 4.53 percent), Beijing SDL Technology Co., Ltd. (up by 4.19 percent), Changshu Tianyin Electromechanical Co., Ltd. (up by 4.13 percent), Shimge Pump Industry Group Co., Ltd. (up by 3.71 percent), Hunan Valin Steel Co., Ltd. (up by 3.31 percent), Beijing Orient Landscape & Environment Co., Ltd. (up by 3.28 percent), Shandong Meichen Science & Technology Co., Ltd. (up by 3.17 percent), Zhejiang Wanfeng Auto Wheel Co., Ltd. (up by 3.09 percent) and other individual stocks outperform the market significantly.
Noticeably, 24 stocks related to environmental protection such as Kaier New Materials, Kaidi Ecological and Environmental Technology Co., Ltd., COFCO Biochemical (Anhui) Co., Ltd., Changzhou Tenglong Auto Parts Co., Ltd. and Xingyuan Environment Technology Co., Ltd. have formed their own trend since December, while the market has fallen by 3.46 percent during the same period. The above-mentioned 5 stocks have grown by 30.22 percent, 21.20 percent, 18.04 percent, 12.13 percent and 10.03 percent respectively.
As China’s air pollution has obvious seasonal characteristics, fog and haze weather frequently happen in North China in each winter. The country is increasingly strengthening efforts in environmental protection for a long time and often introduces policies in environmental protection industry. Industrial insiders are widely rosy about the growing potential of the industry and think that it is time to make deployment in environmental protection stocks.
Capital flow may prove this view. According to information of market research center of Securities Daily based on statistics from Hithink RoyalFlush Information Network Co., Ltd., nearly 800 million yuan has flowed into environmental protection stocks since December. Galaxy Biomedical Investment Co., Ltd., Focused Photonics (Hangzhou), Inc., Changzhou Tenglong Auto Parts Co., Ltd., Kaier New Materials, Guangdong Chant Group Inc. and COFCO Biochemical (Anhui) all have gained order with capital more than 20 million yuan. Only taking yesterday into consideration, capital inflow trend was more obvious. 60 environmental protection stocks were favored by big orders, 23 of which saw net capital inflow with more than 10 million yuan. Stocks with higher net capital inflow are Anhui Shengyun Environment-Protection Group Co., Ltd. (62,816,800 yuan), Weichai Power Co., Ltd. (29,452,000 yuan), Beijing Capital Co., Ltd. (29,203,000 yuan), Meinian Onehealth Healthcare Holdings (29,051,200 yuan), Kaier New Materials (27,538,000 yuan), SDL Technology (25,023,900 yuan), Tus-sound Environmental Resources Co., Ltd. (20,834,800 yuan), Beijing Originwater Technology Co., Ltd. (18,076,500 yuan), Citic Heavy Industries Co., Ltd. (18,075,800 yuan) and Harbin Dongan Auto Engine Co., Ltd. (17,631,800 yuan).
As for this, many securities companies including Kaiyuan Securities Co., Ltd., Dongxing Securities Company Limited and Guotai Junan Securities Co., Ltd. believe that the country will pay more attention to this industry in 2017. With acceleration in implementation of PPP projects, this industry is expected to embrace a new round of investment opportunity.
In fact, many PPP projects related to environmental protection have been set up and approved in recent years. Relevant enterprises become stronger while participating in project operation. Due to characteristics with great demand, small investment amount and scattered investment of environmental protection project, private enterprises are more passionate to join in than state-owned enterprises. Many high-quality private listed companies with impressive profit and good performance emerge in this field.
Dongxing Securities predicts that environment governance effect will become a primary goal of environmental protection work during the 13th Five-year Plan period and PPP will be an important means to realize this goal. Based on release of PPP projects, frequent introduction of policy, support from guiding funds and huge potential in this industry, it is forecast that driven by demonstration projects of Ministry of Finance and promotion projects of National Development and Reform Commission, 2017 and 2018 will see extensive signing contracts of PPP projects, and platform companies and leading companies will be benefited from this. Firstly, during process of undertaking project, platform companies will directly gain benefits as they are advantageous in capital, qualification and financing ability. It is suggested to keep eyes on Originwater Technology, Nanfang Zhongjin Environment Co., Ltd., Yueyang Forest & Paper Co., Ltd. and Beijing Orient Landscape & Environment Co., Ltd. Secondly, during the process of project operation, local governments make payment based on governance effect and leading firms in segmented fields with technology and management advantage will welcome rapid development. It is suggested to focus on Chengdu Techcent Environment Co., Ltd., Shenzhen Huakong Seg Co., Ltd. and Tianjin Motimo Membrane Technology Co., Ltd.
Translated by By Vanessa Chen