22 October 2016
Environmental stocks are all the rage. The Shanghai Composite Index could hit 3,500 if the trading volume is high enough. Photo: CNSA
Environmental stocks are all the rage. The Shanghai Composite Index could hit 3,500 if the trading volume is high enough. Photo: CNSA

Where to invest in China’s 13th Five-Year Plan

Environmental protection-related shares were up 6.71 percent on Tuesday, the best performers for the day.

That’s no surprise given that environmental issues are up for discussion as part of the 13th Five-Year Plan in the coming fifth plenary session of 18th central committee of the Chinese Commuist Party.

The meeting is set for Oct. 26 to 29 in Beijing. Investors should plan early.

Also on the agenda are economic growth, information technology development, opening up of the service industry, the aging population and reform of state-owned enterprises.

Top of the watch list is whether China will lower its gross domestic product (GDP) growth target.

To double GDP in 2020 from the 2010 level requires a 6.6 percent annual growth rate in the next five years.

President Xi Jinping said that goal could be achieved with a 7 percent annual clip, he recently told the foreign media.

Amid a global economic slowdown, the market is not very confident about China.

If Beijing further cuts its GDP growth target, the impact might be felt around the world, so I think China will set the goal at about 7 percent.

The development blueprint will influence the market in the coming weeks.

Some reports said China plans to build six to eight nuclear power plants under the 13th Five-Year Plan that would put it past the United States and Japan in installed nuclear capacity before 2030.

In the wake of Fukushima disaster, China halted construction of new nuclear plants.

Now that construction has resumed China, is likely to catch up with its original plan to build up its nuclear energy.

Nuclear power is more efficient than other forms of green energy such as wind and hydropower.

Dongfang Electric Corp. (600875.SH, 01072.HK), which makes electric generators and build power plants, saw its shares climb in Hong Kong and in the mainland.

Solar power is expected to figure prominently on the agenda.

Sources said the government may target 200 million kilowatts of installed solar capacity, double that in the previous five-year-plan.

Annual demand for solar power is forecast to reach 20 gigawatts to 30 gigawatts, higher than the present level.

That might help explain Tuesday’s 7.4 percent jump in the share price of Linyang Electronics (601222.SH), which sells electronic energy meters and management devices.

After posting gains for two consecutive sessions, investors are turning more positive on mainland stocks, driving turnover.

The rise in the index is closely linked to increased trading volumes.

Tuesday’s increased transaction volume shows investors are more willing to buy stocks.

If the volume continues to climb, the index is very likely to reach several months’ high.

The Shanghai Composite Index hit 3,300 on Monday. It could hit 3,500 if the trading volume is high enough.

This article appeared in the Hong Kong Economic Journal on Oct. 13.

Translation by Myssie You

[Chinese version中文版]

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a columnist at the Hong Kong Economic Journal

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