On July 28, 2026, the Hong Kong stock market overall declined, with the Hang Seng Index down 0.3%, but the power sector bucked the trend, becoming one of the brightest sectors of the day. By close, Longyuan Power (00916.HK) rose 4.5%, Huaneng New Energy (00958.HK) gained 3.8%, CGN New Energy (01811.HK) rose 2.9%, and over 80% of stocks in the sector closed in the green. The main catalyst for this rally was the morning release of the Opinions on Promoting High-Quality Development of Green Electricity Trading (hereinafter referred to as the Opinions) by the National Development and Reform Commission (NDRC).
Policy Boost: Green Electricity Trading Ushers in Institutional Dividends
The Opinions clearly set a target that by 2027, national green electricity trading volume will account for 10% of total social electricity consumption, up from the current level of about 2%. The policy proposes 15 measures in four areas: trading mechanism, market access, price formation, and consumption guarantee. Key highlights include:
- Expand trading entity scope: Include distributed PV and decentralized wind power into the green electricity trading market, allowing new energy projects invested by individuals to participate.
- Optimize pricing mechanism: Establish a linkage mechanism between green electricity premium and carbon emission allowances, promoting green electricity prices to reflect environmental value.
- Strengthen consumption responsibility: Set minimum green electricity consumption ratios for key energy-consuming enterprises; those failing to meet the target must purchase green certificates or face penalties.
- Encourage cross-border trading: Explore mutual recognition of green electricity with Hong Kong, Macau, and Southeast Asian countries, opening overseas market space for HK-listed new energy companies.
Li Wei, an analyst at CSC Securities, commented: "This is the most groundbreaking policy document since the launch of the green electricity trading pilot in 2021. It not only sets quantitative growth targets but also internalizes environmental costs through market mechanisms, significantly improving the profitability of new energy power."
Sector Performance: Profit Expectations and Valuation Repair Converge
After the policy release, the Hong Kong power sector reacted swiftly. Longyuan Power, as a wind power leader with over 30 GW of wind capacity and a green electricity trading share exceeding 30%, is a direct beneficiary of the policy expansion. The company's CFO stated at a midday performance briefing: "We expect green electricity trading revenue to grow by over 40% in the coming year." Huaneng New Energy, due to its layout in offshore wind and distributed PV, became a key institution for additional positions.
From a valuation perspective, the current PE (TTM) of the Hong Kong power sector is only 11.2 times, near a five-year low. This is attributed to factors such as earlier losses from coal-fired power and concerns over new energy subsidy phase-outs. However, the Opinions are expected to repair the sector's profitability by enhancing green electricity income. UBS in its latest research report upgraded the new energy operation sub-sector rating to "overweight" with an average target price increase of 18%.
Capital Flows: Southbound Funds and Foreign Capital Return
Southbound funds net purchased HK$1.26 billion in Hong Kong power stocks today, the largest single-day net inflow in nearly a month. Among them, Longyuan Power and Huaneng New Energy netted HK$420 million and HK$310 million respectively. On the foreign side, institutions such as Morgan Stanley and BlackRock also increased their holdings in related stocks after the close. Market participants believe that policy clarity and growth potential attract long-term capital allocation.
Industry Outlook: Green Electricity Trading Accelerates Reshaping Power Landscape
Over the past five years, HK-listed new energy operators have benefited from capacity growth but have been plagued by the "price" pain point—green electricity premiums were insignificant, leading to a "volume without price" dilemma. This policy breaks the deadlock from a top-level design: on one hand, mandatory consumption ratios create rigid demand; on the other hand, linking with the carbon market enhances the environmental premium of green electricity. According to estimates, if green electricity prices rise by RMB 0.05 per kWh over the benchmark price, net profit impact could reach 15%-20%.
However, challenges remain. CLP Holdings (00002.HK) rose only 1.2% today due to its high share of traditional coal power and greater transition pressure. Additionally, issues such as regional imbalance in green electricity trading and cross-provincial consumption barriers still need to be addressed. Analysts point out that companies with "high-quality existing wind/solar resources + high green electricity trading ratio + strong operational capability" will emerge victorious in this round of policy dividends.
Investment Strategy: Focus on Leaders, Position for Long Term
For Hong Kong stock investors, the policy inflection point for the power sector has arrived. In the short term, two dimensions can be considered: first, pure new energy operators that directly benefit, such as Longyuan Power and Huaneng New Energy; second, supporting areas like grid-side energy storage, such as CIMC Enric (03899.HK) in hydrogen energy storage. However, some stocks have already risen sharply, increasing the risk of chasing highs. It is recommended to build positions in batches and hold for the medium to long term.
Overall, the new green electricity trading policy injects a strong stimulus into the Hong Kong power sector. Under the resonance of the "dual carbon" goals and market-oriented reforms, HK-listed power assets may usher in a valuation revaluation window. Investors should seize policy dividends and seek structural opportunities amid the downturn.