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The Near Term Trend for Chinese Solar Stocks

February 11, 2010

Solar stocks made a good year end run during December 2009 and early January 2010 period. They were all pulled back since. Now earning season is about to start. What is the near future prospect for solar stocks?

In our view, the near future is not bright for the sector as a whole. At the moment, we are not placing any of Chinese solar stocks in our long term buy-and-hold list.

There are several reasons:

1. European countries, the main source of income for Chinese solar companies, are facing big financial troubles now. High debt rate may place a tougher bank lending standard. This may result in difficult financing for solar installations. In addition, German, by far the biggest customer for Chinese solar companies in Europe, may cut as much as 15% feed-in tariff from July 1, 2010 and thus may reduce the solar companies' profit margin.

2. China's domestic solar market is still very small compared with European market. Therefore China's market will not contribute much for their profit.

3. Oil price has reached year high in early January, 2010. Our view is that January high of oil price will be the high for the most part of 2010. That means, solar stock prices reached its year high in early January, 2010 as well.

4. The stock prices for all major US solar players have repeatedly set new year lows such as FSLR, ENER, SPWAR, WFR. That is not good for Chinese solar stocks either.

We will follow solar company's Q earnings and their guidance and will revisit their stocks in about one month of time.

Related stocks: CSIQ, CSUN, JASO, SOL, SOLF, YGE, STP, TSL and LDK.


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