Solar stocks are creeping up nicely for a few months now since May. This confirms my analysis that the short-term turmoil in the solar industry is ending. See my previous essay “Solar Stocks on the Rebound?” dated January 2013.
Solar is a global market where Chinese companies now dominate after many others have fallen as a result of the dramatic price plunge due to technological advance. This is welcomed by consumers because they are paying less for more efficiency, just like high-tech products. Solar demand worldwide continues to increase at a fast pace, which presents great potential for the companies that survive the price turmoil. The following shows the share price movements of top Chinese solar companies:
Yingli (YGE): high $42 (2007), low $1.25 (2012 Dec), high $3.05 (2013 Jan), high $8.13 (2013 early Oct).
JA Solar (JASO): high $135 (2008), low $2.91 (2012 Dec), high $5.96 (2013 Jan), high $10.81 (2013 early Oct). The stock price reflects a reverse split of 5:1 implemented on 12/10/12.
Trina Solar (TSL): high $36 (2007), low $2.04 (2012 Dec), high $5.81(2013 Jan), high $16.10 (2013 early Oct).
Suntech (STP): high $90 (2007), low $0.71 (2012 Dec), high $1.87(2013 Jan), high $1.70 (2013 early Oct). This company is the largest in the world in terms of sales. It is teetering on the brink of bankruptcy after defaulting on a bank loan. In this kind of situation, the stock price usually comes down to 10 cents, but it did not. It seems that the stock market thinks it may survive.
The solar industry is one that receives top national priority in Chinese economic planning. The reasons are: its huge market size, Chinese global dominance, and the fact that China lacks oil and natural gas. The nation’s energy appetite desperately needs an alternative source.
The Chinese state banks are pouring money into the major solar companies to tie them over this difficult period. Recently, the government recommends consolidation between the major companies to further increase efficiency and market share. This increases the possibility of mergers. Should one occur, it would mean a good play in the stock market for the industry as a whole. This is perhaps the reason why solar stocks are quietly rising fast in anticipation.