Asia’s Utility Stocks Have Never Had It So Good in Two Decades

-- Utilities stocks have emerged as an unlikely favorite of investors in Asia, and bets are growing that their standout rally this year has further to go.Powering the sector’s boom after two years of losses are supportive local policies and the frenzy surrounding artificial intelligence, which is causing a dramatic increase in electricity demand in many parts of the world.

Local factors such as a robust Indian economy and China’s environmental ambitions are also playing a role in utility stocks’ relative outperformance versus the broader Asian market, as against their peers in the US and Europe. In China, the popularity of utilities firms partly results from a weak economy and a struggling stock market that has prompted investors to flock to defensive stocks with higher dividends. Meantime, Beijing’s lofty climate goals and an ongoing power market reform also have brightened the sector’s outlook.

The global AI frenzy also has increased investor appetite for utilities stocks in South Korea and Malaysia given the perceived demand boost from data centers. Korea’s HD Hyundai Energy Solutions Co. has jumped 9% this year, while Malaysia’s YTL has surged 85%. Asia’s broader equity benchmark is up 7.8%.

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