China is becoming a major participant in all matters from electric cars to renewable energy and, according to JPMorgan, these resources will profit from the green energy boom.
Hydrogen that is environmentally friendly
Hydrogen is poised to be the next big thing in green energy, powering data centers, heating homes, and electric vehicles.
According to JPMorgan, there is a “resurgence of interest” in using hydrogen fuel cells in electric vehicles, and orders for such vehicles may increase in the second half of this year.
These “positive catalysts” could boost stocks such as Hong Kong-listed Dongyue Group, which owns a hydrogen materials division.
According to JPMorgan, its top solar stock picks could see 40 percent earnings growth in 2022, which should drive stocks higher.
Polysilicon is currently in short supply, with approximately 80% of the global industry relying on Chinese sources for the material, which is required to manufacture solar panels.
Nonetheless, the bank believes the supply shortage will be “short-lived.”
“We advise investors to accumulate quality names capable of gaining market share and delivering strong growth in the post-poly tightness era,” it said.
The bank decided on two stocks:
Sungrow is a Shenzhen-based company that makes solar inverters and energy storage systems, among other things.
Flat Glass Group is a Hong Kong-listed company. It primarily manufactures glass but also builds solar photovoltaic power plants.
Stocks related to electric vehicles
China is poised to take the lead in the global electric vehicle industry and, by some measures, is already far ahead of the United States in this sector.
JPMorgan analysts named Chinese EV battery maker CATL as one stock they are bullish on. They stated that the company will launch sodium-ion batteries in July, which are widely available and relatively inexpensive when compared to traditional lithium batteries.
According to the analysts, lithium batteries are “handicapped” due to limited availability, higher costs, and environmental risks associated with the metal’s mining.
JPMorgan also chose Guangzhou Tinci Materials and Capchem, both of which manufacture electrolyte, a substance found in automobile batteries.
According to the bank, there will be strong demand and limited electrolyte supply, resulting in high electrolyte prices.
Investment banking’s future is shifting, and JPMorgan has identified 8 shares that it believes will profit.
“In our opinion, the Investment Banking (IB) industry is in much better shape today than it has ever been,” the bank said in an analyst note this week.
It sees four primary reasons for this: lower risk as a result of a shift to more sustainable and less capital-intensive business, higher entry barriers, more “sustainable” revenue streams, and a growing share of captive wealth management. Captive funds are typically defined as private investments managed for a small number of people.
Investment banking revenues have grown slowly since the 2008 financial crisis, owing to regulatory headwinds that have resulted in capital reductions. The bank now believes that “most regulatory headwinds and litigation are behind us,” and that the industry is poised for “unprecedented growth.”
The following are the bank’s top picks:
JPMorgan’s U.S. favorites in the global investment banking space are Goldman Sachs and Morgan Stanley, with the former being its top global investment bank pick.
“We see GS as a contender given its agile culture, which allows it to move as a Fintech, and its strong IT platform to retain its strong market share growth momentum from Tier II players,” analysts at the bank wrote in a research note.
Barclays is the European winner.
“In Europe, we see Barclays as a relative winner, with its transaction bank providing an advantage, as well as its diversified IB revenue mix, allowing double-digit returns throughout the cycle — unlike all other European players,” the analysts wrote.
Despite a hit to its earnings earlier this year as a result of the Archegos Capital scandal, Swiss lender UBS is the next favorite on the list.
“We see MS (Morgan Stanley) and UBS as Equity S&T (sales and trading) players,” with captive wealth management franchises to back them up.
Its next picks are French investment banks Societe Generale and BNP Paribas, as well as Deutsche Bank of Germany and Credit Suisse of Switzerland.
The bank bases its long-term revenue assumptions on a 5% annual growth rate. However, it considers these to be “conservative” because they do not account for market share gains, China opening up its capital markets, Europe’s securitization market gradually opening up, and the drive toward ESG (environmental, social, and governance) changes introducing new innovations.