Subsidy Absurdity: China Throws More Cash at Solar Stocks


We’ve got quantitative easing here in the good old U.S.A., and in China authorities have announced what amounts to quantitative shining: a program of subsidies worth 9.5 billion renminbi, or $1.5 billion, intended to increase the nation’s output of solar power to 10 gigawatts in the current fiscal year from 7 gigawatts last year. The subsidies have sent the stocks of Chinese solar energy companies – makers of solar cells and the like – sharply higher, although the moves are barely noticeable blips on a long-term stock chart.

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JASO Chart

First Solar (FSLR), rode solar subsidies to ridiculous heights, offering one of the great up-and-down stock charts of the past decade. Insider sales were huge at First Solar. Its PE ratio once topped 400.

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FSLR Chart

Nomura Securities offers good news and bad news about the subsidies: They should be “meaningfully positive for the sector,” Nitin Kumar, a Nomura analyst, wrote in a recent note to investors, but the rallies in response to the program may already reflect the help that the industry can expect and maybe more:

“We see Chinese solar makers needing to raise utilizations over the next five to six months to support higher demand, which in turn is likely to push pricing. While we do see these measures as a positive catalyst, the solar stocks have rallied 50-100% over [the] last month and look to have more than fully captured the upside.”

Nomura’s ratings for stocks in the sector are “under review.” For the moment the firm has a neutral assessment of JA Solar (JASO), Trina (TSL) and Canadian Solar (CSIQ) and a “reduce” rating – a genteel way to recommend selling the stocks – on Suntech (STP), Yingli (YGE) and LDK Solar (LDK). All six stocks trade on U.S. markets.

Conrad de Aenlle, a contributing editor at YCharts, has covered investment and personal-finance topics for more than 20 years, writing for The New York Times, International Herald Tribune, Los Angeles Times, Bloomberg News, Institutional Investor, MarketWatch and CBS MoneyWatch. He can be reached at

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