HSBC Research: El Nino Intensifies Summer Power Demand Pressure and Supply Volatility in Asia; MIDEA GROUP Seen as Heatwave Beneficiary

HSBC Global Investment Research issued a report stating that the 2026 El Nino has formed and will intensify summer power demand pressure and supply-side volatility in Asia. The broker is positive on China's hydropower sector and India's battery energy storage systems (BESS), while wind and solar power face challenges. It holds a Neutral view on thermal power. Stocks rated Buy include YANGTZE POWER (600900.SH) +0.110 (+0.408%) in China's hydropower sector, Indian independent power producer ReNew Energy Global plc (RNW.US) , and air-conditioner export play MIDEA GROUP (00300.HK) +1.550 (+1.802%) Short selling $580.55M; Ratio 52.445% . HUANENG POWER (00902.HK) +0.060 (+1.107%) Short selling $22.48M; Ratio 10.852% in China's thermal power sector is rated Underweight.

Statistics show that under El Nino conditions, northern China tends to experience hotter and drier summers, while southern China may face more flooding. Based on experiences from the 2015-16 and 2023-24 El Nino cycles, rainfall may decline across most parts of India and SE Asia. Water utilities will face tests depending on whether reservoir coordination capabilities and capacity are sufficient. The impact on hydropower operators depends on geographic location. The broker favors YANGTZE POWER (600900.SH) +0.110 (+0.408%) , as historical data indicate that its assets are located in the upper Yangtze River basin, making it more likely to benefit from stronger rainfall.

HSBC Global Investment Research said that during El Nino periods, solar irradiance in southern China may decline, while wind resources in northern China may weaken, leading to lower average output and greater intermittency for wind and solar power generation. Solar panels achieve optimal photovoltaic conversion efficiency at around 25°C, and extreme heat will affect power generation efficiency. Meanwhile, greater volatility in renewable energy generation will benefit battery energy storage systems and independent power producers that can capitalize on peak-valley electricity price spreads. Against this backdrop, Indian independent power producer ReNew Energy Global plc (RNW.US) deserves attention.

HSBC Global Investment Research remains cautious on China's thermal power sector, while air-conditioner exporters are expected to benefit from heatwaves. Although summer heatwaves imply potentially stronger power demand, upside room for earnings of China's thermal power producers in 2026 is limited, mainly because annual power purchase agreements have already been locked in and coal costs are rising. In addition, reserve capacity in China's power system has improved significantly in recent years, suggesting summer electricity supply should remain adequate. Meanwhile, warmer winters may weaken heating demand, and therefore utilization rates of power and gas utilities are expected to face downward pressure. The broker believes MIDEA GROUP (00300.HK) +1.550 (+1.802%) Short selling $580.55M; Ratio 52.445% could become a consumer-sector beneficiary under El Nino-driven heatwaves, with upside potential in its residential air-conditioner export business.

Stock | Investment Rating | TP

YANGTZE POWER (600900.SH) +0.110 (+0.408%) | Buy | RMB32
HUANENG POWER (00902.HK) +0.060 (+1.107%) Short selling $22.48M; Ratio 10.852% | Underweight | HKD5
MIDEA GROUP (00300.HK) +1.550 (+1.802%) Short selling $580.55M; Ratio 52.445% | Buy | HKD110

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