Bloomberg News

Solar Stocks Fall on Forecasts for Net Losses: China Overnight

November 22, 2011

Nov. 22 (Bloomberg) -- Chinese stocks in the U.S. sank for a fourth day as increased bets against solar stocks helped drag down prices before third-quarter earnings reports this week that analysts forecast will show net losses.

The Bloomberg China-US 55 Index fell 3 percent to 96.21 in New York at 1:51 p.m., heading for the lowest close in a month. Suntech Power Holdings Co., Trina Solar Ltd., and Yingli Green Energy Holding Co. led declines among peers. Focus Media Holdings Ltd., a digital advertising company, fell as much as 66 percent, the most on the index, after Muddy Waters LLC recommended betting against the shares.

Suntech, the world’s largest maker of solar panels, may announce today its adjusted third-quarter net loss was $45 million, compared with a $33.8 million loss in the prior quarter, according to the average estimate of 20 analysts surveyed by Bloomberg. Trina and Yingli will also incur losses for the quarter, Bloomberg survey data showed.

Most of the Chinese solar companies due to report third- quarter sales this week “lowered expectations for quarterly shipment and margin,” Dan Ries, an analyst at Collins Stewart LLC in New York, wrote in a report yesterday. “The industry continues to suffer from a combination of excess capacity and an absence of available construction financing in the important Italian market.”

Ries maintained a “sell” rating on Suntech, and forecasts the company will report a net loss next year. He also retained a 12-month price target of $2.

Suntech Sinks

Suntech slid as much as 9 percent to a four-week low of $2.13. Its American depositary receipts have tumbled 73 percent this year, heading for the biggest decline since 2008.

Data Explorers said in a report last week that Chinese solar stocks dominate the list of names with the greatest amount of short interest, in which an investor profits from falling prices. The companies accounted for eight out of the top 20 shares, the New York-based research firm said.

Trina, China’s fifth-largest supplier of solar panels, has 36 percent of its shares on loan to short sellers, up 1 percentage point from a month ago and the highest among the 20 most-shorted stocks listed in the Data Explorers’ report.

Trina, based in Changzhou, China, may report an adjusted net loss of $1.9 million, the mean forecast of 19 analysts in a Bloomberg survey showed. Net income was $11.8 million in the quarter ended in June, Trina said Aug. 23. The company cut its estimate for solar panel shipment this year to 1,400 megawatts on Nov. 3, from its August guidance of 1,750 megawatts to 1,800 megawatts. It also revised third-quarter product delivery down to as much as 375 megawatts, from an earlier forecast of 520 megawatts.

Seven-Week Low

The company slid as much as 7.1 percent to a seven-week low of $5.99. Its shares have lost 74 percent this year.

The Standard & Poor’s 500 Index fell 2.4 percent in its fourth day of declines to 1,186.56 amid concern lawmakers had failed to agree on a deficit plan.

The ishares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., retreated 3.9 percent to a one-month low of $33.94. The Chinese yuan weakened 0.1 percent to 6.36 a dollar, trimming its gain this year to 3.9 percent, according to the China Foreign Exchange Trade System.

Yingli, based in Baoding, China, dropped 5.2 percent to $3.30, the lowest level since Oct. 5. The company may also announce a net loss for the three months ended in September, after making a net profit in the previous quarter, estimates compiled by Bloomberg showed.

Focus Media, which delivers advertising through televisions in office lobbies and outdoor billboards, plunged as much as 66 percent after Muddy Waters, which is known for having predicted Sino-Forest Corp.’s retreat, recommended betting against the Shanghai-based company.

The company’s ADRs sank as far as $8.79, the lowest since September 2009. Short-selling interest in Focus Media rose to 10 percent of its free-floating shares on Nov. 18, the highest in a year at least, according to Data Explorers. The ratio was 1 percent at the beginning of the year.

--Editors: Marie-France Han, Brendan Walsh

To contact the reporter on this story: Belinda Cao in New York at lcao4@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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