Chinese solar companies fell in New York, sending the benchmark index (SHCOMP) to its biggest decline in a week, on concern an oversupply of panels and reduced subsidies in Europe will erode revenue.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in the U.S. dropped 1.4 percent to 86.92 yesterday in New York. Yingli Green Energy Holding Co. lost 11 percent while Trina Solar Ltd. (TSL:US) sank after cutting its forecast for second-quarter shipments. Suntech Power Holdings Co. (STP:US) tumbled 15 percent after the world’s largest solar-panel maker said it may have been the victim of fraud. Youku Inc. (YOKU:US) and Tudou Holdings Ltd. (TUDO:US) slid the most in two weeks.
Chinese solar manufacturers have reported losses since the second quarter of 2011 as the industry has been plagued by overcapacity and as Europe’s debt crisis prompts governments to trim solar energy subsidies. Germany’s Solarworld AG (SWV) last week led a group of manufacturers asking the European Commission to investigate whether Chinese competitors sold products at below- market rates after the U.S. imposed duties on solar imports from China in May.
“The industry is undergoing a very painful correction due to a massive oversupply,” David Smith, portfolio manager of the Gabelli Green Fund, said by phone yesterday from Purchase, New York. “There are uncertainties in demand as European countries including Italy and Germany cut their subsidies. This tariff issue around the EU and U.S. on Chinese solar panels creates a situation of even more uncertainties.”
The iShares FTSE China 25 Index Fund (FXI:US), the biggest Chinese exchange-traded fund in the U.S., slipped 0.2 percent to $34.06, snapping a three-day rally. The Standard & Poor’s 500 Index of the biggest U.S. shares was little changed at 1,385.30.
Suntech, based in Wuxi of China’s Jiangsu, decreased to $1.34 in New York, the lowest level since the company’s initial public offering in 2005.
The company said it’s suing Javier Romero, a former Suntech sales representative who manages an affiliated company that Suntech says pledged German bonds as collateral for payment guarantees. The bonds may never have existed, Suntech said in a statement yesterday. The company said it may delay its second- quarter earnings report while it evaluates the financial impact of the incident.
Trina, the third-biggest solar cell maker and fourth- biggest photovoltaic panel maker, dropped 11 percent to $4.84, the lowest level since March 2009.
Trina Cuts Estimate
The Guangzhou-based company lowered its estimate of solar module shipments for the second quarter by as much as 25 percent to 390 megawatts, citing solar power projects in China and the effect on U.S. import tariffs from the Asian country. It also cut its gross margin forecast to as low as 7 percent from the previous guidance of 10 percent.
Analysts at both Deutsche Bank AG and Jefferies Group Inc. reduced (TSL:US) their 12-month price estimates for Trina to $5 from $6 yesterday.
Yingli (YGE:US), the world’s sixth-largest silicon-based solar module producer based in Baoding of China’s Hebei province, tumbled 11 percent to a record low of $1.83. LDK Solar Co., the world’s second-largest maker of wafers, dropped 5.8 percent to $1.47.
Youku, owner of China’s most popular online video site, retreated the most in two weeks on concern its purchase of smaller rival Tudou, a deal announced in March, won’t be completed this quarter.
Beijing-based Youku tumbled 6.1 percent to $16.90 in New York, the biggest decline since July 17. Shanghai-based Tudou sank 6.6 percent to $26.23.
Doubts on Merger
“Some people are still doubting whether the merger will go through,” Echo He, an New York-based analyst at Maxim Group LLC, said in a phone interview yesterday. “These stocks are vulnerable to investors who want to sell because of China’s macro economy and also because of its online ad market.”
The companies said in separate statements on July 18 that their shareholders will meet on Aug. 20 to approve their merger. The transaction, which was valued (YOKU:US) at $925 million when announced, has a current value of $630 million.
China Eastern Airlines Corp., the second-biggest domestic carrier, and China Southern Airlines Co., the biggest by passenger number, retreated for the first time in three days after the Xinhua News Agency said yesterday the regulator increased jet fuel prices by 96 yuan ($15) for August.
American depositary receipts of Shanghai-based China Eastern slid 3.8 percent to $17.18, trading 0.2 percent below its Hong Kong stock, the first discount (CEA:US) in three days. China Southern lost 2.7 percent to $24.72, the most in a month.
Foreign Investment Rules
The Shanghai Composite Index of mainland stocks declined 0.9 percent to 2,109.91 yesterday, the lowest level since March 2009.
International companies with investment quotas under the Qualified Foreign Institutional Investor program are now allowed to buy bonds on China’s interbank market for the first time, the nation’s securities watchdog said in a July 27 statement on its website. Previously, overseas investors were restricted to exchange-listed debt, which is less than 2 percent of the interbank equivalent.
Foreign investors will also now be permitted to buy bonds of small- and medium-sized companies through private placements, the regulator said. Such securities typically yield more than their counterparts listed on China’s stock exchanges.
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