This week, investors are recognizing that trade wars are posing obstacles to the energy transition in the US. However, there remains optimism for potential opportunities in China as it actively pursues its renewable energy goals.

The deterioration of trade relations between the two largest global economies "solidifies challenges for US companies attempting to import vital components for decarbonization technologies," according to analysts from UBS Group AG's global wealth management division. "Ultimately, tariffs are expected to raise the costs of clean technologies at a time when clean tech is already significantly more expensive in the US than in other nations," UBS Wealth analysts Amantia Muhedini and Tiffany Agard mentioned in a client note dated April 4. Initially, stock indexes linked to clean energy managed to absorb the impact of President Donald Trump's tariff announcement on April 2. However, UBS suggests this was likely driven by the inclusion of US utilities in those indexes, which were temporarily viewed as a safe haven for investors. This trend has since reversed, and clean energy stocks have fallen in tandem with the broader market. Is there any refuge in this turbulent market? Wind energy producer China Longyuan Power Group Corp. and hydroelectric companies China Yangtze Power Co. and Huaneng Lancang River Hydropower Inc. were among the only 20 firms on the CSI 300 whose shares rose from the market's opening on Monday through midday Tuesday, even as the overall index declined over the previous two days. These utilities benefit from low-cost inputs such as sunlight, wind, and water, and Chinese developers primarily use domestic supply chains to expand solar, wind, and hydroelectric facilities. "The Chinese power sector remains a defensive investment, and we favor hydro over other power producers due to its lower generation costs, supportive valuations, and solid fundamentals," stated Jefferies analysts Alan Lau and Johnson Wan in a research note on Tuesday.

Investors also anticipate an increase in the buying and selling of clean energy equipment within Asia. "The theme of Asia selling back to Asia will be significant," observed Khan Yow, managing director at Singapore-based Seraya Partners, a private equity firm with $1.3 billion in assets focused on Asian infrastructure. "This market will be somewhat insulated from reciprocal trade measures." Yow emphasized that investors view Asia as a promising long-term opportunity for clean energy expansion. "One strong strategy is to intensify our focus on Asia in the realms of renewables, energy transition, and digital infrastructure," he commented. In the midst of market volatility, there may be a trend toward privatizing clean energy companies. "It's reasonable to expect a rise in take-private transactions in the clean energy sector as valuations in the public markets come under strain," remarked Armina Rosenberg, co-founder of Minotaur Capital, a hedge fund based in Sydney.

Rosenberg added that promising opportunities could arise in firms specializing in energy management software, grid optimization, or smart energy systems, "especially those that have robust underlying technology but are affected by market fluctuations."

Edited: Olatunbosun Ibrahim