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Asia’s Climate Stocks Primed for Rebound, Money Managers Say

Asia’s Climate Stocks Primed for Rebound, Money Managers Say

Global summit presents buying opportunity: BNP Paribas Asset
Asia’s environment-linked stocks have lagged broader market

The global climate summit could prove to be a catalyst for a rebound in Asia’s environment-related stocks, which have been underperforming the broader market this year.

Aberdeen Standard Investments Ltd., BNP Paribas Asset Management and Pictet Asset Management are among funds suggesting the summit’s outcome can spark a green rally, after it brought the U.S. back into the global conversation on climate change and spurred new emissions-linked targets from the likes of China, Japan and South Korea.

Asia’s environment-related stocks, which rallied on optimism over the potential impact of U.S. President Joe Biden’s green investment policies following his election in November, have seen those gains fizzle out. The FTSE Environmental Opportunities Asia Pacific Index is lagging the broader MSCI Asia Pacific Index by more than six percentage points in 2021.

Asia's environmental stocks close to breaking below relative uptrend

“Given the pull back in the sector over the first quarter, this presents an interesting opportunity as stocks are down at the same time that macro conditions are becoming more supportive,” said Edward Lees, a portfolio manager at BNP Paribas. “When looked at alongside the other global announcements we had over Earth Day, that the structural trend of greening economies remains intact.”

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The euphoria surrounding green stocks after Biden’s election gave way earlier this year to concerns about excessive valuations and a general rethink of the so-called reflation trade, of which they were a key constituent.