Clean-Energy Investors Thrown For a Loop in Post-Vote Turnaround

Investors riding the prospects of Joe Biden’s $2 trillion clean energy plan have been thrown for a loop as a drawn-out vote count illustrates how much influence the outcome of the U.S. election will have on the world’s shift away from reliance on fossil fuels.

The S&P Global Clean Energy Index, made up of 30 companies from around the world, surged toward a record on Thursday, bouncing back from losses a day earlier, as Biden’s path to victory in the presidential race appeared clearer, while Republicans’ ability to maintain control of the Senate looked less certain.

Alternative energy stocks surged in recent months as investors weighed the prospect of Democrats controlling both the White House and Congress, which would allow them to aggressively push toward renewables and away from fossil fuels. Investors became wary ahead of Election Day as shares had outperformed and analysts began downgrading some recommendations.

Thursday’s rebound came as investors reassessed the industry’s prospects under whatever power dynamic ultimately takes shape in Washington. RBC strategist Helima Croft pointed out that a Biden administration would still have the power to push clean energy use even with a divided Congress.

“There remains significant scope to use executive action and federal regulation that can advance goals for solar panels, wind turbines, EV charging stations, emissions and the like,” Croft wrote in a research note.

JinkoSolar Holding Co. and SunPower Corp. were among those rebounding from Wednesday’s drop, both posting double-digit gains. Meanwhile, Chinese electric-vehicle maker Nio Inc. rallied to a record in U.S. trading, pushing its market value past that of General Motors Co.

In Asia, the FTSE Environmental Opportunities Asia Pacific Index hit an all-time high on Friday. The gauge -- which tracks more than 200 environment-linked businesses -- has gained 7.7% this week, set for the most since April.

“All hope is not lost even with a Republican Senate,” Michael Weinstein, an analyst at Credit Suisse Group AG, said in an interview.

Before the election, investors had priced in a high likelihood of an extension to solar’s investment tax credit, and even a split Congress doesn’t completely eliminate that possibility, Weinstein said.

The S&P clean energy index, which includes Danish wind-power supplier Orsted AS and the Brazilian hydroelectric-energy producer Companhia Energetica de Minas Gerais, climbed 6.6% on Thursday, the most since March, to close within 1% of its Oct. 9 record high. It’s up 79% this year.

Clean-Energy Investors Thrown For a Loop in Post-Vote Turnaround

Many clean energy companies are well positioned to achieve rapid growth under the global transition away from fossil fuels, Morgan Stanley analysts including Stephen Byrd told clients in a note on Wednesday. Even so, the bank chose to downgrade First Solar Inc. to a sell-equivalent, saying shares are likely to move lower regardless of the election outcome after the stock rallied more than 50% this year.

Meanwhile, electric vehicle companies, seen as big gainers even under a Biden win with a split Congress, continued their share gains from Wednesday. Electrameccanica Vehicles Corp. rose 34% in the two trading sessions since election day. Nio is up 19% over the same period.

Tesla Inc. also gained on Thursday, as did Nikola Corp. While both stocks had opened strong on Wednesday, they lost steam as the day progressed without any resolution on the election results.

Lithium miners also lagged Wednesday on fears that spending on green infrastructure appears less likely absent a “blue wave.” Lithium stocks Livent Corp. and Albemarle Corp. rebounded in Thursday’s session.

The longer-term investment thesis for the sector remains unchanged due to rising electric vehicle demand, according to Bloomberg Intelligence analyst Christopher Perrella.

©2020 Bloomberg L.P.

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