Solar ETF Enters Bear Market

ETF Trends

Somewhat quietly compared to the Global X Social Media Index ETF (SOCL) , iShares Nasdaq Biotechnology ETF (IBB) , Internet ETFs and other momentum offerings, the Guggenheim Solar Energy Index ETF (TAN) has fallen on hard times.

With Monday’s tumble of more than 4%, TAN is now down 21% from its March 7 high, a stunning reversal of fortune for an ETF that was not only last year’s top-performing energy ETF, but also the best non-leveraged ETF of any stripe. [Other Momo ETFs Tumble]

Even with Monday’s decline, TAN is still higher by 8.3% this year, noticeably better than IBB, SOCL and the largest Internet ETFs, all of which are in the red year-to-date. Still, China, the 800-pound gorilla in the solar room, looms large in determining the near-term fortunes of TAN and the rival Market Vectors Solar Energy ETF (KWT) . KWT is down about 16% since March 7.

On Monday, Credit Suisse pared its 2014 Chinese solar installation forecast by 500MW to 11.5GW, well below the 14GW the Chinese government previously forecast. Credit Suisse says Jinko Solar (JKS), Trina Solar (TSL) and Canadian Solar (CSIQ) have access to project financing, but Yingli Green Energy (YGE) and ReneSola (SOL) do not, Shuli Ren reports for Barron’s.

Yinglie Green and ReneSola, which sport an average of price tag of just over $3, combine for less than 4% of TAN’s weight. Credit Suisse has sell ratings on the two stocks. It is not just smaller holdings that are weighing on TAN.

Although shares of FirstSolar (FSLR), TAN’s largest holding t nearly 10% of the ETF’s weight, are still sharply higher this year, the stock has plunged 6.2% in just the past week. Shares of Elon Musk’s SolarCity (SCTY) have slid 30% in the past 90 days. SolarCity is TAN’s seventh-largest holding with a weight of 5.3%.

Earlier this year, the Commerce Department recently enacted anti-dumping and anti-subsidy investigations on Chinese and Taiwanese imports of silicon solar photovoltaic products. This is not the first time U.S. regulators have targeted Chinese solar firms, which have been accused of flooding the market with inexpensive supply at times of tepid demand for solar power. [China Could Fight DoJ on Solar Dumping]

In late March, ReneSola was contacted by DoJ, which named the company as a mandatory respondent, indicating this issue has the potential to be a thorn in the side of solar ETFs going forward.

Guggenheim Solar Energy ETF

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ETF Trends editorial team contributed to this post.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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