The new energy sector has experienced persistent volatility and corrections since May this year. What is driving this trend, and does the current landscape warrant investor attention? Our core assessment is as follows: First, the industry's fundamentals remain solid, as the underlying industrial trajectory of energy storage growth and new demand from AI data centers is unchanged. What has shifted is the market's concern over the pacing of domestic demand transitions and the pull-forward effect from earlier installation rushes, along with diverging earnings performance among leading companies. Second, the demand for sector allocation remains intact, as the current valuation levels and the sector's market share suggest that both potential incremental capital and existing funds still have a need to re-allocate toward the sector over the course of the year.

What are the key catalysts driving the sector? The Federal Reserve has resumed its rate hiking cycle, which is generally perceived to put sustained valuation pressure on rate-sensitive growth stocks due to the strength of the US dollar weighing on risk appetite for RMB assets and foreign capital flows. However, whether the collective valuation of solar, storage, and battery companies in the new energy space since 2023 still fits within the traditional growth stock framework, or should instead be assessed within the broader A-share valuation pool, may warrant a fresh examination.

Geopolitical conflicts are also introducing volatility. Over the long term, geopolitical tensions disrupt energy prices, as seen with the US-Iran confrontation, shipping disruptions in the Strait of Hormuz, attacks on Saudi oil pipelines, and renewed military frictions in the Red Sea and Yemen. These factors drive sharp swings in international oil prices and present a double-edged sword for new energy: higher oil prices reinforce the long-term case for energy substitution, but short-term risk aversion and sticky inflation weigh on growth stocks. Over time, the balance between short-term caution and long-term substitution dynamics could push the sector toward a point where it becomes suitable for staged entry.

US-China high-level meetings may also provide a catalyst. Both sides are working toward reciprocal tariff reductions on approximately $30 billion worth of goods, with an official announcement possible during the talks. President Trump signed Section 232 measures on August 6, imposing a 15% tariff on polysilicon derivatives starting December 4 with a minimum import price, a measure that covers all sources of imports. While the US-China thaw cannot be reversed overnight, there is room for marginal improvement in sentiment. Additionally, Trump has recently softened his stance on the 100% tariff on Chinese EVs and may accept Chinese automakers building factories in the US. If the meetings produce signals of loosening on EV or solar tariffs, this would serve as a sector-level catalyst.

Regarding the industrial logic of the new energy sector, the battery and storage segment shows genuine demand, recovering prices, and a trend of volume growth with price stability. The prosperity of the battery industry stands in contrast to capital market pricing, which is dominated by rate hike concerns and demand pull-forward worries. The correction since June has primarily been a de-rating of valuations rather than a breakdown in the underlying investment thesis.

In the solar segment, the anti-involution campaign has entered deep waters, with the industry grinding through a phase of shrinking volumes, stabilizing prices, and ongoing losses. Solar is transitioning from a state of whole-industry pressure to the fourth major industry shakeout, where leading players achieve profitability while weaker players face elimination. Anti-involution measures have helped halt price declines, but genuine recovery in profitability will depend on actual capacity exits. Structurally, integrated leaders, inverter makers with high storage exposure, and auxiliary material segments may hold a relative advantage.

Is the trend toward reducing reliance on CATL a negative factor? This shift is essentially a defensive move by buyers in a seller's market, which actually confirms that CATL holds pricing power in the cell segment. Furthermore, CATL's storage system business is primarily focused on overseas markets, while its domestic operations mainly supply cells, creating clear boundaries of complementarity and competition with system integrators. Market share data also confirms that the dilution effect is real but limited, as CATL held 32.4% of domestic storage battery shipments in 2024 compared to EVE Energy's 13.8%, with CATL still maintaining a commanding lead. The primary concessions have been in lower-priced domestic orders. The de-CATL trend may paradoxically reinforce CATL's industrial dominance, making the bearish case limited.

For investment vehicles in the storage segment, the Hua Bao Storage Battery ETF (159071) tracks the Guozheng New Energy Battery Index, where electrical equipment accounts for over 80% of the weighting, covering companies across the new energy storage battery value chain with substantial storage exposure. As of July 31, 2026, the index's top ten holdings include CATL (12.03%), EVE Energy (10.28%), Sungrow Power (8.42%), and Megmeet (5.79%), with combined weight exceeding 60%. Storage infrastructure addresses the core issue of mismatched timing between electricity consumption and generation. With computing power electricity demand surging and fluctuating, and renewable energy output also increasing with volatility, energy storage that smooths power transmission has become a critical pillar of the era.

For the battery segment, the Hua Bao ChiNext Battery ETF is set to launch, tracking the ChiNext Battery Index with the ChiNext board's 20% daily price limit, offering stronger offensive characteristics. The index constituents include leading battery companies listed on the ChiNext board. As of July 31, 2026, the top ten holdings include CATL (18.29%), Sungrow Power (12.80%), EVE Energy (11.44%), and Lead Intelligent Equipment (5.47%), with a combined weight exceeding 70%, which is higher than battery indices with broader market selection such as the CSI Battery Index. Against the backdrop of sustained high growth in global lithium battery demand, the ChiNext battery segment may continue to benefit from the dual drivers of power and storage applications. It is worth noting that the Hua Bao ChiNext Battery ETF has received official approval and is about to launch, and investors may consider adding the underlying index to their watchlists in advance.

Recent market volatility may be significant, and short-term price movements do not predict future performance. Fund investments may result in losses. Investors should make rational decisions based on their own capital situation and risk tolerance, with close attention to position sizing and risk management. According to the fund manager's assessment, the Storage Battery ETF Hua Bao carries a risk rating of R3 (medium risk), suitable for balanced (C3) and above investors, while the ChiNext Battery ETF Hua Bao carries a risk rating of R4 (medium-high risk), suitable for balanced (C4) and above investors. For suitability matching opinions, please refer to the sales institutions.

Data sources include the CSI Index Company and the Guozheng Index Company, along with the Shanghai and Shenzhen stock exchanges. Regarding ETF-related fees, subscription and redemption agents may charge commissions of up to 0.3% of the standard rate, while on-exchange trading fees are subject to actual charges by securities firms. No sales service fees are collected.

The index constituents mentioned in this article are for illustrative purposes only, and any individual stock descriptions should not be construed as investment advice of any kind, nor do they represent the holdings or trading activities of any fund under the fund manager.

The New Energy Battery ETF Hua Bao passively tracks the Guozheng New Energy Battery Index, which has a base date of December 31, 2014 and a publication date of February 16, 2015. The ChiNext Battery ETF Hua Bao passively tracks the Guozheng ChiNext Battery Index, which has a base date of June 29, 2018 and a publication date of June 27, 2025. The composition of index constituents is adjusted in accordance with the index compilation rules, and historical backtest performance does not indicate future index performance. The fund is issued and managed by Hua Bao Fund, and distribution institutions do not bear responsibility for the product's investment performance or redemption obligations. Investors should carefully read the Fund Contract, Prospectus, and Fund Product Information Summary and other fund legal documents to understand the risk-return characteristics of the fund and select products that match their own risk tolerance. Sales institutions, including direct sales institutions of the fund manager and other sales institutions, conduct risk assessments of the fund in accordance with relevant laws and regulations. Investors should promptly review the suitability opinions issued by sales institutions and defer to their matching results, as suitability opinions among different sales institutions may not be consistent. Furthermore, the risk rating results issued by fund sales institutions shall not be lower than the risk ratings determined by the fund manager. There may be differences between the risk-return characteristics described in the fund contract and the fund risk rating due to differing considerations. Investors should understand the fund's risk-return profile, carefully select fund products based on their own investment objectives, time horizons, investment experience, and risk tolerance, and bear the risks themselves. The registration of this fund by the China Securities Regulatory Commission does not constitute a substantial judgment or guarantee of its investment value, market prospects, or returns. A fund's past performance and net asset value levels do not predict future performance, and the performance of other funds managed by the fund manager does not constitute a guarantee of this fund's performance. Funds carry risks, and investment requires caution.