Trina Leads Solar Stock Slump on German Subsidy Cut Plans: China Overnight

February 26, 2012 by  
Filed under Green Energy News

Trina Solar Ltd. (TSL) led declines in
Chinese solar stocks traded in the U.S. as the company reported
a larger-than-expected net loss and as Germany plans to cut
subsidies for the industry, dimming the outlook for sales.

China’s fifth-largest solar-panel supplier, Trina sank the
most in a month after reporting an increased fourth-quarter loss
that exceeded analysts’ estimates. Yingli Green Energy Holding
Co. (YGE)
and Suntech Power Holdings Co. (STP) also helped drive a 0.3
percent drop in the Bloomberg China-US 55 Index (CH55BN) of the most-
traded Chinese stocks in the U.S. Online book retailer E-
Commerce China Dangdang Inc. (DANG)
tumbled to a five-week low.

Germany, the world’s biggest solar market, will cut federal
aid to the panel industry by as much as 29 percent from March 9
and further scale back subsidies each month beginning in May,
Environment Minister Norbert Roettgen said yesterday. The cuts
are deeper than the 15 percent reduction ordered Jan. 1 and may
hurt manufacturers in Germany and China, where the world’s three
largest panel makers are based.

The tariff cut came sooner than the market was anticipating
and the reduction is deeper, said Chris Kettenmann, a New-York
based energy analyst at Miller Tabak Co. who covers the
biggest Chinese companies in the sector.

“Chinese solar makers sold an average 25 percent to 30
percent of their output to Germany in the last quarter,”
Kettenmann said. “That percentage has been declining and
markets are more concerned in the longer term with growth in
China and in the U.S. markets.”

Falling Prices

The subsidy cut is the most severe since Germany began
supporting the solar industry with a feed-in tariff in 2004,
which granted above market-rates for renewable power. Solar
panel prices fell 46 percent last year after manufacturers in
Asia led by Suntech Power boosted production. European countries
including the U.K., Italy and France have accelerated subsidy
curbs for solar energy in the past year to adapt to falling
panel prices.

The iShares FTSE China 25 Index Fund, the biggest Chinese
exchange-traded fund in the U.S., slid 0.4 percent to $40.14
yesterday after gaining 1 percent on Feb. 22. The Bloomberg
China-U.S. 55 Index fell to 107.41 yesterday in New York, while
the Standard Poor’s 500 Index (SPX) added 0.4 percent to 1,363.46.

American depositary receipts of Melco Crown Entertainment
Ltd. (MPEL)
, a casino operator in Macau, the world’s largest gambling
hub, retreated 0.1 percent to $12.42, trading 1.8 percent below
its Hong Kong stock. The discount was the most since Feb. 14.
Each ADR represents three common shares.

Trina slumped 12 percent to $8.63 in New York, the lowest
level since Feb. 7. The decline trimmed its gain this year to 29
percent, after the stock slumped 71 percent in 2011.

Supply Agreements

Based in Changzhou in China’s eastern Jiangsu province,
Trina incurred a net loss of $65.8 million in the fourth quarter
of 2011, compared with net income of $145.3 million in the same
period a year earlier, the company said in a statement
yesterday.

Trina expects first-quarter gross margin will be in the
“low teens in percentage terms” after negotiating new lower-
cost supply agreements for silicon, the raw material in its
panels. The margin, a measure of profitability, was 7.1 percent
in the fourth quarter.

“A dramatic slowdown in Germany, which accounted for 30
percent of global demand last year, and at such short notice
will be negative for pricing across the solar value chain in an
industry already suffering from overcapacity,” Timothy Arcuri,
a solar analyst at Citigroup in San Francisco, wrote in a
research note yesterday.

Dangdang Drops

Suntech, the world’s biggest solar-module maker also based
in China’s Jiangsu province, fell 8.3 percent to $3.21, the
biggest drop since Jan. 19. Yingli, based in Baoding in northern
China, declined 11 percent to $3.85, the weakest level this
year. LDK Solar Co. (LDK) slid 2.9 percent to $5.97 in New York.

Kettenman at Miller Tabak downgraded Yingli to “sell”
from “neutral” on Feb. 22 after the company said it expected
fourth-quarter shipments to fall more than previously estimated.

E-Commerce China Dangdang, China’s biggest Internet-based
book seller known as Dangdang, sank in U.S. trading after
reporting that its net loss in the fourth quarter widened from
the previous three months as profit margin shrank and marketing
expenses rose amid competitions.

Beijing-based Dangdang’s loss in the last three months of
2011 was 129.8 million yuan ($20.6 million), compared with a
loss of 81.9 million yuan in the third quarter, and net income
of 14.8 million yuan a year earlier, the company said yesterday
in a statement. The fourth-quarter loss exceeded the 85 million-
yuan average estimate of five analysts surveyed by Bloomberg.

Hang Seng

Dangdang dropped 3.9 percent to $6.65 in New York, the
lowest level since Jan. 18. Piper Jaffray Co. analyst Eugene
Munster cut his 12-month price target for Dangdang’s ADRs to $12
from $16, while Wallace Cheung at Credit Suisse Group lowered
the goal to $8.60 from $8.80 yesterday.

The Shanghai Composite Index (SHCOMP) climbed for the fifth day,
rising 0.3 percent to 2,409.55, the highest level since Nov. 29.
The Hang Seng China Enterprises Index (HSCEI) of shares traded in Hong
Kong retreated 0.9 percent yesterday to 11,714.29, falling from
a six-month high reached on Feb. 22.

Qihoo 360 Technology Co Ltd. (QIHU), a Chinese computer security
software developer, jumped to the strongest level in almost
three weeks after saying fourth-quarter net income more than
tripled.

Beijing-based Qihoo said net income in the last three
months of 2011 increased by 274 percent from a year earlier to
$15 million, in a statement released on Feb. 22 after U.S.
markets closed. The results exceeded the $9.9 million average
estimate of five analysts in a Bloomberg survey.

Leading Indicators

ADRs of Qihoo gained 4.7 percent to $18.32, the highest
price since Feb. 3, after earlier surging as much as 6.9 percent
to $18.70.

Analysts at RBS Asia Ltd. and Stifel Nicolaus Co.
reiterated their “buy” recommendations on Qihoo stock
yesterday.

The Conference Board’s leading indicator index for January,
which is designed to capture prospects over the coming six
months, is scheduled to be published in China today.

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

To contact the editor responsible for this story:
Emma O’Brien at
eobrien6@bloomberg.net

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