Chinese Solar Stocks Are Plunging!
Last week I warned you that high flying Chinese solar stocks were poised for a fall. It was all but certain the European Union would impose anti-dumping sanctions on these companies in early June.
And as a result, I urged you to lock in your gains on these stocks immediately.
Hopefully, you took my advice.
On Wednesday, the EU indeed imposed anti-dumping tariffs – some as high as 67.9% – on Chinese solar companies. The duties are meant to punish certain Chinese solar panel manufacturers who have been selling their products in the EU at prices well below their fair market value.
The practice better known as “dumping”.
EU investigators found that over 100 Chinese solar companies have been selling solar panels at 88% below fair market value on average. And a few companies have been caught selling their solar products with dumping margins as high as 112.6%!
As I predicted… Chinese solar stocks plunged on the news.
JA Solar (JASO) endured the most pain, falling 9.2%. Trina Solar (TSL) and Suntech Power (STP) weren’t too far behind with losses of 8.6% and 7% respectively. And a number of other Chinese solar stocks also dropped like stones… LDK Solar (LDK) -6.5%, Yingli Green Energy (YGE) -5.4%, China Sunergy (CSUN) -3.7%, and JinkoSolar (JKS) -2.7%.
The worst part is… this could be just the beginning of a major move lower for these stocks.
In fact, the only thing keeping Chinese solar stocks from dropping off a cliff is that the EU decided to phase in the tariffs. For the next two months, the anti-dumping duty will be just 11.8%. However, starting on August 6th, those duties will increase to anywhere from 37.2% to 67.9%.
And there’s no doubt these sanctions will have a negative effect.
According to the EU, solar panels imported from China represented over 80% of the European market in 2011 and 2012. As prices for these products are pushed higher by the anti-dumping tariffs, demand for them is certain to decline in favor of cheaper products made by European solar companies.
As Europe accounts for about 75% of the global solar market, this will be a major blow for Chinese solar companies.
What’s more, there may be further sanctions coming down the pike.
The EU is currently investigating allegations that the Chinese government is subsidizing Chinese solar companies. If it finds that these companies are benefiting from unfair government subsidies, it could impose a separate set of tariffs on Chinese solar products.
The EU is expected to release its findings from this investigation by August 5th. And the deadline for imposing any anti-subsidy duties is August 7th.
Profitably Yours,
Robert Morris
Category: Foreign Markets, Penny Stocks
