Over the past year or more, electrical equipment has been one of the most volatile sectors on the A-share market (the electrical equipment here includes both main grid equipment, and power electronics and power supply links). A number of companies quickly became double-bagger stocks first, then took a sharp downturn after May 2026, with most of their market value cut by half from the highs.

During the same period when the A-share market cooled down from a hot state, leading companies such as Siyuan Electric and Eagle Energy successively disclosed their prospectuses on the Hong Kong Stock Exchange, planning to raise additional financing. The market is cooling down while capital activities are heating up. This seemingly contradictory combination just provides the best perspective to inspect the quality of this round of electrical equipment sector.

First, let's make a simple review of the market trend.

Essentially, this round of electrical equipment market rally is the result of the resonance of three main lines: grid equipment going global, large-scale energy storage overseas, and AI power supply chain. The three main lines continued to gain momentum from 2025 to 2026, pushing almost all sub-segments including transformers, tap changers, energy storage systems, AI power supplies, HVDC/SST into the fast track of valuation expansion.

The continuous decline since May 2026 does not mean that the above fundamental logic has suddenly collapsed, but that "the narrative has changed". On the one hand, the performance delivery pace of some companies is lower than the most aggressive market expectations; more critically, on the other hand, the market has begun to price in new concerns — easing overseas supply, rising trade risks, and position adjustment after overcrowded A-share AI trading.

Two recent landmark events have pushed this narrative change to a new level.

First, on August 27, 2026, the President of the United States signed an executive order banning the procurement or installation of some foreign-manufactured large power system equipment and related software in the United States. On the same day, A-share transmission and distribution equipment and inverter stocks collectively fell: Siyuan Electric hit the limit-down, Sungrow Power once plunged 14% during the session, and Jinpan Technology dropped by more than 7%.

Second, in September 2026, UBS downgraded the rating of China's electrical equipment industry. UBS pointed out that the sector has fallen by 30% to 50% from its high point within the year, mainly due to the reverse position adjustment of AI trading and the faster-than-expected easing of the global shortage of transformers and gas turbines; it also predicted that exporters will face share and profit margin pressure from 2028 to 2029.

The data at individual stock level is more intuitive. From the beginning of 2025 to the high point in 2026, the maximum increase of Sifang Co., Ltd., Siyuan Electric, Sungrow Power, and Jinpan Technology exceeded 400%, 220%, 160%, and 170% respectively; then they retraced from the high point by around 50%.

When the market cools down from a hot state, electrical equipment companies have all set their sights on the Hong Kong stock market. Companies including Siyuan Electric and Eagle Energy have successively disclosed prospectuses on the Hong Kong Stock Exchange, forming "A+H" dual listings. In fact, after the sharp drop in A-shares, the offering price on the Hong Kong stock market will inevitably be greatly discounted, which is equivalent to diluting the equity of original shareholders at a low level.

However, the pace of companies raising funds in Hong Kong has not slowed down, but is even somewhat eager to outperform each other. The biggest story driving this trend is going global — no matter participating in overseas grid equipment renewal or undertaking data center construction, the reasons for going global seem sufficiently convincing.

Figure: Summary of representative prospectuses of electrical equipment companies applying for Hong Kong stock listing Source: JinDuan Research Institute

The overseas electrical equipment market is huge, with a scale about 4 times that of China's domestic market.

Take the broad-caliber market size given in Eagle Energy's prospectus as an example: the global electrical equipment market size exceeded 8.5 trillion yuan in 2025, and is expected to exceed 12 trillion yuan in 2030, with a CAGR of over 7%. At the same time, electrical equipment under the traditional decentralized distribution architecture is facing the bottlenecks of low efficiency, high redundancy and large space occupation, and the demand for upgrading and iteration is clear.

Figure: Discussion on global electrical equipment in Eagle Energy's prospectus Source: Prospectus

Going global is upgrading from "receiving orders" to "building systems". Overseas certification cycles often last for months to a year, the barriers for customer access are high, and companies also need to cope with localization requirements brought by policy fluctuations. To gain a firm foothold overseas, a complete layout of overseas production capacity, local services, channels and compliance systems is required, all of which require substantial capital expenditure.

The Hong Kong stock market just provides an international capital platform — financing, mergers and acquisitions, employee incentives, and brand endorsement can all be realized in this market.

However, a cold water comes immediately, which is geopolitical restrictions. The U.S. executive order and the EU's restrictive measures are also brewing. Major regions are trying to promote the "sovereignization" of equipment supply chains, and these policy orientations will significantly raise the risk discount of overseas orders on customer access and geopolitical uncertainty.

So the question arises: against the backdrop of sluggish stock prices, do enterprises still have sufficient reasons to queue up for discounted additional issuance in Hong Kong? To answer this question, we need to examine the domestic and overseas markets respectively.

China's domestic electrical equipment sector is a large single market, whose core demand comes from the centralized procurement of State Grid Corporation of China and China Southern Power Grid. The advantage is that the two grids have been promoting localization for many years. At present, except for UHV components, the vast majority of electrical equipment has been localized; moreover, the harsh and complex working conditions in China have also put the technical strength of domestic enterprises in the global first echelon.

But in terms of pure industrial logic, the only variable for the prosperity of domestic grid equipment has always been the capital expenditure of the power grid. Therefore, electrical equipment is a typical capital expenditure-driven industry, whose business model is not outstanding.

Entering the "15th Five-Year Plan" period, State Grid

Source: eu.36kr