Environmental stocks surge after smog documentary

Monitoring facilities producer, waste processing firm see shares soar

Shares in environmental protection-related companies on the mainland capital market surged on Monday, after a smog documentary produced by a former celebrity TV hostess became a hot topic over the weekend.

Shares in 18 environmental protection-related firms, including environment-monitoring facilities producer Hebei Sailhero Environmental Protection High-tech Co and waste processing company Dongjiang Environmental Co, surged to the daily limit of 10 percent on Monday, beating the 0.79 percent increase in the benchmark Shanghai Composite Index.

Analysts said that the surge in environmental protection-related stocks was mainly triggered by the hit smog documentary made by former CCTV anchorwoman Chai Jing.

The 103-minute documentary, which searches for answers to the country's poor air quality, received over 100 million hits after it was released on Saturday and has sparked nationwide discussion on the topic.

"The documentary has greatly raised the public's awareness and knowledge on environmental protection, which will surely benefit the growth of the industry," said Zhao Zhexin, a marketing director at Beijing Winsunny Harmony Scitech Co, a drug firm which produces anti-smog masks. "Equipment and technology providers in the sector will see a boost."

Chen Jining, the country's new minister of Environmental Protection who just took office on Friday, expressed his appreciation of the smog documentary at a Sunday press briefing. He noted that law enforcement in environmental protection will be strengthened in the future.

The country has been stepping up efforts in environmental protection. The new Environmental Protection Law came into effect on January 1, and has been dubbed the "strictest" environment law ever in China.

Analysts said that tougher environmental law enforcement will also boost the demand for environmental protection equipment and technology.

In 2015, the total output of the country's energy-saving and environmental protection sector is expected to reach 4.5 trillion yuan ($719.5 billion), up an average of 15 percent annually from 2010 to 2015, according to the sector's five-year plan announced in 2012.

Xu Guangfu, a senior strategy analyst at Xiangcai Securities, noted that investors' attraction to environmental protection-related stocks will continue into the future with government support. Also, companies in the clean-energy sector such as solar firms are also expected to perform well in the future, he said.

"More companies related to environmental protection are expected to get listed in the future," Xu told the Global Times on Monday.

He noted that though some listed firms in the environmental protection sector do not report impressive financial results at present, they have great growth potential and thus are a good target for long-term investment.

Chai's documentary came days ahead of the country's two sessions, the annual meetings of the national advisory body and legislature, which will start Tuesday and Thursday.

"I think environmental protection will become a hot topic during the two sessions," Wang Danqing, a partner at Beijing-based ACME Consultancy, told the Global Times on Monday.

Wang noted that the environmental protection industry is expected to see rapid expansion as it is in line with the country's goal of transforming and upgrading the industrial structure.

"Many venture capital and equity firms showed interest in the sector several years ago, given the huge potential," Wang said.

Though companies in sectors that usually generate high pollution, like the cement and steel-making sector, did not see any major turbulence in share prices on Monday, analysts said that they face pressure in the long term.

"They are under pressure to upgrade their environmental protection equipment, and at the same time, they also face pressure from the government that is determined to phase out outdated capacity," Wang said.