Monday, June 29, 2009

Of con men, spivs and ‘gangreenous’ stocks

From FT Alphaville:

The headline on a recent Bloomberg stock market report out of Japan said it all: “Japan Stocks Rise on Green Technology Optimism”.

We’re seeing a growing number of headlines in that vein. Indeed, the rising wave of investor optimism on everything and anything related to so-called “green technology” has seen some lucrative deals and surging stock prices in sectors ranging from alternative energy sources to hybrid cars, anti-air pollution systems and environmental technology of every description.

Even China - once the scourge of environmentally-conscious investors - has gotten in on the act, with a $3.4bn deal last week by Hong Kong-traded power plant operator GCL-Poly to buy a mainland solar-cell parts maker.

In another trend, western asset managers are eyeing new “green investing” opportunities further afield, in Asia and elsewhere. JPMorgan Asset Management for example, recently decided to become the first foreign company to participate in South Korea’s ‘g0-green’ initiative.

As Bloomberg reported, the US bank signed a letter of intent with the South Korean government for its plans to set up “Korea Green Funds” of more than $1bn to invest in the country’s alternative energy industry. Seoul, meanwhile, plans to invest 4,200bn won ($3.4bn) by 2013 to make products including PCs and television sets that use less power and emit less carbon dioxide.

All this - err, greenery - is proving a bit much for CLSA’s ever-ascerbic Asia strategist Christopher Wood, who takes a swipe at “green investing” in the latest issue of his weekly client newsletter Greed & Fear, and grumbles about how “global warming” has become the “developed world’s new religion”.

The arbitrary nature of “green” investment mandates is “obviously irrational from an investment perspective”, says Wood:

From a longer term perspective it is almost inevitable that the frenzy for green will attract to the area the usual mob of con men and spivs who jump on every bandwagon. There is also a more fundamental risk that government sponsorship of alternative energy leads to massive over investment in the area.

At a recent meeting in Beijing, he recounts, a local economist expressed concern about a future investment bubble in alternative energy in the mainland as a result of policies designed to encourage production in this area....MORE