The Wall Street Journal published a report by Dieter Holger on renewable energy ETFs strong performance so far in 2019.
Holger wrote that U.S.-listed exchange-traded funds focused on renewable energy are starting the year strong, buoyed by demand in China.
Linda Zhang, chief executive of ETF-focused asset manager Purview Investments, said there is a strong correlation between market performance and exposure to China, where government support for renewable energy has been growing after solar subsidies stalled in mid-2018.
“Country exposure matters, especially U.S. and China exposure mattered a lot in the last three months,” Ms. Zhang said.
After North America, the Invesco Solar ETF’s largest market exposure is the Asia-Pacific region at 29%, according to FactSet, and 13% of its top 10 holdings are in Chinese companies, such as Xinyi and GCL-Poly Energy Holdings Ltd. (3800.HK). Nine of its top 10 holdings are up for the year and the past three months, and the fund’s top Chinese holdings have climbed 32% on average this year, compared to 13% among its U.S. holdings, according to FactSet.
China’s solar industry had a strong rebound after a much depressed 2018, when the competition led to oversupply in China and the subsidy was reduced. Chinese government has increased its target to 35% share of the country’s energy coming from renewables by 2030.
The WSJ report discussed several US listed renewable ETFs. Some are energy specific, such as TAN for solar and FAN for wind energy, while others include a range of renewable energies, solar, wind and hydro - ICLN, GEX, PBW, OCLN.
Renewable ETFs are sector ETFs, so they tend to be more volatile than the broad market index ETFs. As they tend to be global in nature, there can be currency gains or losses associated with these products.