Suntech Tops Slump as Spreadtrum Surges: China Overnight

Suntech Power Holdings Co. tumbled, leading a slump in Chinese equities traded in New York, on concern the European Union will impose import duties on China’s solar products.

The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. slid 2.2 percent to 93.9 yesterday, sinking the most in five weeks. Suntech, the biggest solar-panel maker in 2011, plunged as its shares’ 50-day volatility surged to a four-year high. Yingli Green Energy Holding Co. fell the most since May 2012, while Huaneng Power International Inc. extended losses after Deutsche Bank AG downgraded the stock. Spreadtrum Communications Inc. rebounded after a two-day decline.

While officials from the U.S., China and the EU have engaged in preliminary talks to settle a dispute over solar-energy products, according to people familiar with the situation, the EU said May 21 it will stick to its June 6 deadline to decide on duties. China and the EU failed to reach an agreement on export prices in their first round of negotiations, China’s official Xinhua News Agency reported yesterday. The Standard & Poor’s 500 Index dropped the most in three weeks amid concern that the Federal Reserve will scale back its stimulus efforts.

“In general, if the EU implements tariffs on Chinese panels, that would hurt demand for solar because the price of solar will go up,” Gordon Johnson, an analyst at Axiom Capital Management Inc. in New York, said by phone. “Solars are already decisively more expensive than traditional fossil-based energies. The EU’s tariffs will hurt demand further.”

ETF Plunges

The iShares FTSE China 25 Index Fund, the largest Chinese exchange-traded fund in the U.S., sank 1.5 percent in New York to $37.54, slumping for a second day. The S&P slipped 0.8 percent to 1,655.30, the most since May 1, after Federal Reserve Chairman Ben S. Bernanke said in remarks to Congress that the central bank could “step down” the pace of asset purchases in the next few meetings if the labor market continues to improve.

Suntech’s American depositary receipts tumbled 20 percent to $1.02 in New York, after surging 98 percent in the previous three days. Fifty-day volatility on the stock soared to 211 yesterday, the highest level since January 2009. That would compare with an average of 105 over the past year.

LDK Solar Co., the Chinese solar-panel maker that has reported seven straight quarters of losses, dropped 19 percent to $1.66, retreating from a four-month high. Trina Solar Ltd., also based in Changzhou, lost 15 percent to $6.11, while Yingli Green Energy Holding Co. sank 15 percent to $3.02, after posting a 44 percent gain in a three-day advance.

The rally earlier this week was partly due to solar manufacturer’s mixed earnings, according to Axiom’s Johnson.

Solar Earnings

JA Solar Holdings Co., the largest solar-cell producer by capacity, said May 20 first-quarter shipments exceeded the Shanghai-based company’s forecast on strong demand in Japan. Yingli, the world’s largest solar-panel maker, reported a day later first-quarter shipments declined less than it had previously forecast, according to preliminary figures.

“The market’s ignoring negative earnings and reacting very favorably to positive earnings,” Axiom’s Johnson said. “JA Solar results reported this week were slightly better than expected. People got very excited about this because the stocks had been beaten down and everyone was looking for a bottom.”

Options trading and investors buying shares to cover their short sales are “exacerbating” moves in the Chinese solar stocks, increasing their volatility, Chris Kettenman, Chief Energy Strategist at Prime Executions Inc. in New York, said by phone yesterday. In a short sale, an investor borrows a security and sells it, expecting to profit from a decline by buying it back at a lower price.

ADRs of Huaneng, China’s biggest electricity producer, slipped 2.5 percent to a one-month low of $41.50, extending a three-day slump to 16 percent. Its Hong Kong-traded shares fell 8.3 percent to HK$7.94, or $1.02, yesterday. Each ADR represents 40 shares.

Power Tariff

Citigroup cut its recommendation on Huaneng to neutral from buy, lowering a price target for its Hong Kong shares to HK$9.2 from HK$11.25. Analysts led by Pierre Lau said in a note yesterday China may cut on-grid tariff for coal-fired power plants in the third quarter by 2 percent.

Phoenix New Media Ltd., a Beijing-based Internet, TV and mobile-news provider, jumped 9.2 percent to $4.89, the steepest advance since June. The company had the largest gain on the China-US gauge. Trading volume on its ADRs was four times the daily average in the past three months.

Spreadtrum, a Shanghai-based mobile-chip designer, surged 4.8 percent to $18.68 yesterday, rebounding after an 8.4 percent decline in the first two days of the week.

Thirty-day volatility on the China-US gauge rose to 23 yesterday, the highest level since August. The Shanghai Composite Index of domestic Chinese shares retreated 0.1 percent to 2,302.40, after rising for five days. The Hang Seng China Enterprises Index in Hong Kong slipped 0.3 percent to 11,053.04, for a second day of declines.