Donald Trump will be the next President of the United States of America, and the Republicans have taken control of the Senate. In this piece, we assess the implications for sustainable energy, and energy more broadly, considering his recent pre-election rhetoric and the potential actions of his senators. We conclude that, with respect to the Inflation Reduction Act, Trump will struggle to make significant reforms. We see his executive powers allowing him to promote fossil fuels more so than significantly slow the growth of a lower carbon energy system.
Click here to download the complete bulletin: “Trump Victory and the Future of the IRA”
Guinness Atkinson Alternative Energy Fund (GAAEX)
Important Information
1 https://www.solarpowerportal.co.uk/news/solar_pv_costs_fall_82_over_the_last_decade_says_irena
2 https://www.ipu.org/file/4925/download
3 https://about.bnef.com/blog/battery-pack-prices-fall-as-market-ramps-up-with-market-average-at-156-kwh-in-2019/
4 https://www.npr.org/sections/goatsandsoda/2017/10/19/558821792/report-pollution-kills-3-times-more-than-aids-tb-and-malaria-combined
5 https://www.forbes.com/sites/betsyatkins/2020/06/08/demystifying-esgits-history–current-status/#38a4fea92cdd
Investing involves risk, including the possible loss of principal.
The Fund’s investment objectives, risks, charges and expenses must be considered carefully before investing. The statutory and summary prospectuses contain this and other important information and can be obtained by visiting www.gafunds.com. Read it and consider it carefully before investing.
In matters of dividends, quality matters. The Guinness Atkinson Dividend Builder Fund has, from inception, maintained a focus on quality. Our view is that quality companies are more likely to grow their dividend and, importantly, quality companies have a greater chance to maintain their dividends when times get difficult. In this bulletin, we take a look at the Dividend Builder Fund’s holdings (as of April 30, 2020) and examine whether they have maintained their quality during the COVID-19 pandemic.
Click here to download the complete bulletin “Quality Dividends Matter”
Flurry Wright, one of our London-based colleagues, recently took a trip to China and visited the northern city of Datong in Shanxi Province, an area that holds one third of all China’s coal reserves. The city is far removed from the current trade spat but is playing a full part in the story of China’s economic and social transformation whose path we believe is exorable. Her observations on her city visit illustrate why China’s investment story is not a passing fad. Miles away from President Trump’s world of fake news and the Mar a Lago golf club, the steady lifestyle upgrading in China rolls on.
Click here to download the complete bulletin “Datong Case Study“
At the beginning of July, the US fired its opening salvo and introduced a 25% tariff on $34bn of Chinese imports, with tariffs on another $16bn due to follow. The US is now planning to impose a 10% tariff on $200bn worth of Chinese imports with the potential of more to come. Many are now becoming concerned over the impact of these tariffs on not just the Chinese and US economy but also the impact on global growth.
Click here to download the complete bulletin “The Reality of Tariffs”
Investors should be thinking about energy equity exposure because:
On Wednesday, May 8th, President Trump announced his decision to cease the United States’ participation in the Joint Comprehensive Plan of Action (JCPOA). Read our take on how this may or may not impact oil prices.
After such a strong run this year in stock markets around the world, investors are concerned that something nasty is about to happen. Unless there is a strong view about the dollar, interest rates, or a global price shock then the question comes down to valuation. Have markets become too expensive and therefore should we retreat a little before year end?
To us, this looks like a broader move in sentiment to cut back on positions that have done well, i.e. a question of valuation and profit-taking. This does not appear to be because of any fundamental change to market earnings or economic conditions.
We think that Asian markets never got expensive. Valuations have come up from multi-year lows (which also depresses the 10-year average, making that comparison lower than it might otherwise be) and are supported by strong earnings growth forecasts which in turn are supported by strong profit growth already reported.
What follows is a quick review of what we think is relevant.
Click here to download the complete bulletin “Asian Markets Retreat – Our View”
Is inclusion into MSCI benchmarks a game changer for China A shares? Yes and No.
The Chinese stock markets are big. The combined market capitalization as at June 23, 2017 of the major Chinese stock exchanges in Shanghai and Shenzhen amounts to almost $7.75 trillion which compares to the New York Stock Exchange capitalization of $22 trillion, NASDAQ $9.4 trillion, Tokyo $5.4 trillion and London at $3.18 trillion. China’s stock markets are also active with turnover on that day of $37 billion which compares with $67 billion in New York and $49 billion on Nasdaq and $6.5 billion in London.
All of this makes it no surprise that at some point China’s domestic shares would one day be included in international benchmarks. China’s economy is the second largest in the world1; it does more trade in goods ($3.8 trillion a year) than any other country2; its market for passenger cars is nearly 25 million a year3 – GM sells 4 out of every 10 cars it produces to China4.
The notion that Chinese companies should be kept out of international benchmarks indefinitely was clearly not likely.
What has MSCI done?
MSCI has now taken the view that Chinese stocks are important enough and that access to them has been made easy enough for ‘index-linked investment vehicles’ to include them in their index calculations from May 2018. There are however remaining difficulties that mean that there are some quite specific criteria attached.
Click here to download the complete bulletin “China A shares into MSCI benchmarks”
1 World Bank data
2 China Customs data & Bloomberg
3 24,479,768 cars in the 12 months to May 31, 2017. China Automotive Information Net
4 Source: General Motors
The Chinese leadership is now promising “to make our skies blue again” in a popular move to address an issue that has given rise to public protests across China against the industrial smog that blights so many cities. The solution to a pressing economic problem is now linked to an emotive popular issue. The pollution is the result of coal burning by heavy industry, the very sector that is weighed down by excess capacity and debt, which threaten China’s economic survival. The government needs this sector to cut debt and capacity but they have encountered resistance from local governments and vested interests. Environmental reasons have been used before by central government as a tool to push through change. Now they appear to be leading with it.
Click here to read the bulletin, “Blue Skies” Thinking in China