China investors turn to renewables, chips, to avoid regulators' attention Solar power station is seen in Tongchuan, Shaanxi.
HONG KONG - Investors in China are turning to semiconductors, renewable energy and consumer-focused firms in the belief that they offer safe habitat against a blizzard of regulatory action that has battered confidence and forced funds to overhaul their portfolios.
Money managers view months of crackdowns that have hammered shares in sectors from tutoring to big tech as part of a larger push from China's Communist Party leadership to pursue common prosperity at the expense of private-sector profit.
Yet as buying has wiped billions from the value of companies in the crosshairs, such as online giants Tencent and Alibaba, share prices of firms seen on the right side of reform have surged.
Since June, for example, China indexes of clean energy stocks and semiconductor firms are up more than 30% compared with a fall in the global market and a 15% drop in Hong Kong tech shares.
The buying have come from all kind of investors, said Credit Suisse senior investment strategist Suresh Tantia.
Foreign investors' mutual funds, they still need to allocate their money in China due to their mandates, which they want to invest into line with the support the government is delivering, he said.
Investors sifting state media and President Xi Jinping's speeches and books for policy clues saw one standout focus on reducing greenhouse gas emissions with broad goals for peak carbon emissions in 2030 and carbon neutrality by 2060.
Similar broad goals for driving mainland-listed demand and home-grown production have support under domestic discretionary firms and industrials.
There's renewables, semiconductors from an investment strategy Stand point we look at these sectors and see that they could very well keep on receiving support, said Alex Wolf, CEO of JP Morgan Private Bank.
Another one is upgrading manufacturing, he said. China is very keen, and they have said it in the five-year plan, to keep manufacturing as a certain share of the economy if something increases it.
Like portfolio managers at Citi Private Bank and BNP Paribas Wealth Management, Wolf favours mainland listings as less exposed to regulatory scrutiny and because the composition of market tilts away from targets like tech or Internet firms.
Chetan Ahya was chief Asia economist of Morgan Stanley in a note last week; Our equity strategists over time will gradually have a more balanced sector allocation with a reduced weight for Internet and a higher weight for sectors like industrials and IT.