Changpeng Wan
As China’s record heatwave pushes electricity demand to emergency levels, power stocks deliver unprecedented gains with Shaoneng Co., Huayin Electric Power, and Shimao Energy spearheading a market breakout.
Market Response to Quant Rules Debut
Trading volumes dipped to ¥1.23 trillion during the July 7 launch of China’s quantitative trading regulations, down from ¥1.45 trillion previously. Despite the pullback, indices remained resilient with thermal power firms becoming unexpected market leaders. Ten stocks including Shaoneng Co. (韶能股份), Huayin Electric Power (华银电力 NYSE:600744) and Shimao Energy (世茂能源) hit 10% daily limits. Huayin’s 3600% profit surge announcement ignited the rally, demonstrating how climate extremes transform market dynamics overnight.
Triple Engine Behind Power Stocks Surge
Meteorological Drivers
The Central Meteorological Administration’s 14 consecutive high-temperature yellow alerts forced factories and households into maximum cooling mode. Xiangcai Securities projects nationwide grid loads will sustain peak levels through August, accelerating:
- National unified electricity market reforms
- Power asset valuation resets
- Completion of Zhejiang Beilun Power Plant’s new unit
Financial Catalysts
Huayin Electric Power ignited sector momentum with its July 4 forecast of ¥180-220 million H1 profits, representing 3600%-4423% YoY growth. GF Securities notes thermal power’s short-term coal-cost advantages now combine with longer-term regulatory value from China’s capacity pricing mechanism overhaul.
Seasonal Pattern Acceleration
The “summer electricity, winter coal” trading adage reached extreme velocity this year. July’s Power Index gained 15.3% in five sessions – triple its historical average for the period.
Cross-Sector Heatwave Impacts
Cooling Appliance Sales Boom
JD.com data shows air conditioner sales jumped 67% YoY during June’s heat spike. Midea and Gree report production lines at maximum capacity.
Beverage Stocks Quench Demand
Hong Kong-listed brands rode the thermal wave upward:
- ChaPanda (+11%)
- Guming Tea (+6%)
- Mixue Group (+5%)
- Shanghai Auntie (+5%)
Logistics Winners Emerge
Refrigerated transport firms gained 9.2% average June returns according to Securities Times data while standard freight operators declined 5% amid highway efficiency losses.
Investment Pathways Through The Heat
Data Bao identifies three strategic clusters beyond immediate power plays:
- Virtual Power Plants: AI-driven load balancing platforms
- Green Energy Storage: Peak-shifting solutions
- Water Resource Tech: Drought-response irrigation systems
CSRC records show retail investor positions in thermal power ETFs grew 19% during the rally’s first phase – a trend likely to accelerate as tier-2 cities implement rotating blackouts.
While meteorologists project heat relief by late July, electricity rationing continues across Zhejiang and Jiangsu provinces. Power operators with ancillary revenue streams will outperform when temperatures normalize.
Monitor State Grid deployment data and provincial electricity pricing reforms for confirmation of sustained value capture. All investments carry material climate dependency risks through Q3.
