BEIJING (TheStreet) -- Paralleling China's rising anxiety over urban smog and undrinkable water, investors have embraced stocks poised to benefit from what's billed as an all-out government effort to clean up the country's environmental mess.
Chinese makers of smokestack scrubbers, wastewater filtering systems, trash-burning furnaces and electric vehicles have been pegged by stock analysts as "buys" in recent weeks, following recent government announcements of pollution-fighting projects.
Other favorites on the Shanghai and Shenzhen stock exchanges include energy management and research firms, as well as the builders, operators and suppliers of coal-to-gas energy plants.
Chinese stocks in the environmental protection category outperformed the country's market in the first two weeks of February, collectively gaining 4% in value, a Citic Securities report said Monday. "Market enthusiasm for the environmental protection sector is rising," it said.
Wind and solar power companies, however, have received little attention from stock analysts lately. Neither have analysts reacted to the possible earnings impact on companies such as cement and steel makers that have been ordered to reduce emissions.
China's central, provincial and city governments are expected to shoulder much of the cost, either through direct spending or corporate tax breaks, to clean up the country's air, soil and water over the next decade. Governments also bear financial responsibility as majority stakeholders in the big, state-run companies that will have to spend more to cut pollution.
A central government plan to funnel 10 billion yuan into regional, air pollution-fighting projects was unveiled Feb. 12 at a meeting of China's cabinet, the State Council. The meeting's chairman, Premier Li Keqiang, pledged tax incentives and subsidies to companies that cut emissions.
Local governments have promised to do their part. Auto-use restrictions have been imposed in Beijing, Guangzhou and other cities, for example. And Shanghai plans to force 70,000 older vehicles off the road this year.
Beijing Mayor Wang Anshun announced an "all-out effort" to battle air pollution by restricting coal-powered heating plants. And the city of Shijiazhuang, where daily smog levels are typically labeled "hazardous," said steel and chemical manufacturers will have to slash coal emissions or move their plants elsewhere.
Meanwhile, the central government's environment ministry in January ordered cement companies, livestock and poultry farmers, battery manufacturers, makers of leather goods and zinc processors to drastically curtail the wastes discharged by their facilities.
Pressure on the cement industry has been especially strong.
China is the planet's largest cement maker, producing half of the world's output. China National Building Materials and Anhui Conch are the country's largest cement makers. Foreign companies with plants in China include Switzerland's Holcim, France's Lafarge and Taiwan's Asia Cement.
The environment ministry gave cement companies until March 2015 to reduce kiln emissions by installing smokestack scrubbers, upgrading furnaces or switching to cleaner-burning fuels such as natural gas. Cement plants account for up to 4% of the sulfur dioxide, 10% of the nitrous oxide and 20% of the particulates floating around in the nation's smog, the ministry said.
The latest campaign is far from the government's first crack at tackling China's widespread environmental problems. But this time, according to an Orient Securities report, the effort appears to have teeth big enough to benefit environment-related companies and their investors.
"We believe that along with increased supervision" of pollution-fighting projects "sustained and high growth lies ahead for the environmental protection sector and related market segments," the report said.
The most popular environment-focused stocks of late are listed on the Shenzhen exchange. These include Sound Environmental Resources, a maker of garbage, sludge and water treatment equipment, whose stock value rose 16% over the past year; liquids-filter manufacturer Motimo Membrane, whose stock climbed 27% in the past 12 months; and Top Resource Conservation, a manager of energy cogeneration projects whose stock price jumped 10% last week.
At the time of publication, the author held no positions in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.