China's First Hydrogen-Powered Ship Hints at Growth Potential

With its aggressive plans to reach net-zero, China is increasingly looking at hydrogen to power various methods of transportation. Most recently, it put its first hydrogen-powered ship in service.

It was a project that started with the construction of the ship last year (May 17, according to a Global Times report), making it less than a year from construction to actual service. The report noted that the ship can achieve a maximum speed of 28 kilometers per hour with a maximum cruise range of 200 kilometers.

“China’s first hydrogen fuel cell powered 500-kilowatt-service vessel was put into service recently in Zhongshan, South China’s Guangdong Province, marking a breakthrough in the application China’s hydrogen technology in the marine sector,” the Global Times reported.

According to a China Media Group report, this is just one of many ships the second-largest economy is looking to build over the next few years. Given the growth in the number of modified and newly-built hydrogen-powered ships, the market size of domestic hydrogen fuel cell is expected to hit 10 billion yuan or $1.45 billion.

The growth is not isolated to marine technology — on land, hydrogen-powered vehicles are also on the rise. According to a Financial Times report, in China, “hydrogen fuel-cell vehicle sales, led by buses, nearly tripled last year.”

Given this exponential growth, there are a plethora of opportunities for investment in the hydrogen sub-sector. While individual stocks in the sector are an option, exchange-traded funds (ETFs) have the capability to capture sector growth more broadly to strengthen diversification.

Capture Diversified Hydrogen Exposure

For investors looking to get hydrogen sector exposure for growth opportunities, consider a broad option using the Direxion Hydrogen ETF (HJEN). With its broad range of uses, hydrogen can serve in various capacities, allowing for sector diversification — the fund, as of 12/31/22, focuses mainly on industrials, materials, and energy.

The fund seeks investment results that track the Indxx Hydrogen Economy Index, which offers exposure to 30 companies leading the way towards net-zero emissions by providing more accessible, efficient, sustainable solutions across five hydrogen-related sub-themes. The index incorporates domestic securities as well as securities listed on various foreign markets, including among others Japan and South Korea.

The sub-themes include hydrogen production/generation, storage/supply, fuel cell/battery, systems/solutions, and membrane/catalyst. All these sub-themes allow for diversified exposure to the hydrogen industry, which captures growth in sectors-specific areas.

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