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Solar Stocks Fall on Forecasts for Net Losses: China Overnight

Updated on

Chinese stocks in the U.S. sank to a one-month low 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 2.4 percent to 96.74, the lowest since Oct. 21, at the close of trading in New York yesterday. The measure has retreated for four consecutive days, the longest since Oct. 3. 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 4.7 percent to a one-month low of $2.23 yesterday, taking its loss this year to 72 percent. Its American depositary receipts, each representing a common share, sunk as much as 9 percent in earlier trading.

Data Explorers said in a report Nov. 18 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 Loss

The Changzhou, China-based Trina said after U.S. trading that third-quarter net loss was $31.5 million, more than the $1.9 million mean net-loss forecast of 19 analysts, and compared with net income of $11.8 million in the previous three months.

The company dropped 3.4 percent to a six-week low of $6.23, before the earnings, after sinking as much as 7.1 percent earlier. Its shares have lost 73 percent this year.

The Standard & Poor’s 500 Index fell 1.9 percent in its fourth day of declines to 1,192.98 amid concern U.S. 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 3.1 percent to $34.24, the lowest in a month. 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.

China, the world’s second-largest economy, grew 9.1 percent in the third quarter from a year earlier. Consumer price gains slowed to 5.5 percent in October from a three-year high of 6.5 percent in July.

Focus Plunges

Focus Media, which delivers advertising through televisions in office lobbies and outdoor billboards, sank 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 plunged to $15.43, the lowest since July 2010. 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.

The Shanghai Composite Index, which tracks the domestic bourse, lost 0.1 percent to 2,415.13 on concern a slowing property market will damp demand for products from cement to household appliances.

Yingli, LDK

Yingli, based in Baoding, China, retreated 5.5 percent to $3.29, the weakest level since Oct. 4. 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.

LDK Solar Co, China’s second-largest maker of solar wafers, fell 2.4 percent in its seventh day of decline to a seven-week low of $2.83. The company may today report third-quarter net loss of $50.3 million, compared with $34.8 million of losses in prior three-month period, according to the average of 11 analysts’ estimate. Its shares have plunged 72 percent this year.

China’s solar companies will ask the government to start a dumping and subsidy investigation into sales of U.S. polysilicon in the nation after American authorities opened a trade probe into the imports of Chinese solar cells.

The U.S. has exported a “large amount” of polysilicon, the raw material of solar panels, into China, which has become the biggest supplier of the finished solar products, Gao Hongling, deputy secretary-general of the China Photovoltaic Industry Alliance, said by phone yesterday.

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