The No. 1 rated solar stock group gained 5% Monday, led by China names, amid word that Beijing plans to ramp up solar capacity along with an analyst report citing an improving supply-demand outlook.
Several companies considered significantly Chinese surged on the stock market Monday, including Canadian Solar (CSIQ), which swelled nearly 21%, JA Solar (JASO) 15%, Trina Solar (TSL) 13%, and Yingli Green Energy (YGE) 11%.
China is looking to "increase fivefold its installed solar capacity" to help support the domestic industry amid declining profits, Bloomberg News said in a Monday article. It cited a Chinese government announcement in saying China aims for solar capacity of 35 gigawatts by 2015.
U.S.-based solar players also did well. First Solar (FSLR) rose nearly 6%, SunPower (SPWR) 4% and SunEdison (SUNE) 11%. Installer SolarCity (SCTY) climbed 3%.
Monday is the fourth straight session that the solar group has advanced.
Meanwhile, a Deutsche Bank analyst writes that he sees some industry demand ahead.
"Following recent meetings at Intersolar, we continue to see positive momentum for solar stocks, particularly SUNE, ENPH — and expect near-term outperformance of Chinese solar stocks over FSLR, SPWR," Deutsche Bank analyst Vishal Shah wrote in a research note Monday.
He said a Reuters report "suggesting EU's formal probe into Germany's renewable energy law" could serve as a headline negative for solar, but that he sees limited near-term negative impact on fundamentals — "more likely a near-term demand rush if there are fears of potential policy changes in Germany.
A look into the solar supply chain suggests that the demand outlook is improving in several big markets, according to Shah. But he says the already tight supply situation is getting tighter, tied to an emerging credit crisis in China.
"Since demand from several sustainable markets could likely improve further in 2H13/2014, we expect at the very least stable pricing and improving margins for several module suppliers," Shah wrote in his Monday note.
In a separate paper he elaborated on China's addition of 10 GW a year of capacity 2013-15, saying it "will provide credit support to profitable PV manufacturers while encouraging industry consolidation and international cooperation, according to the statement.
Shah notes that China also plans tax breaks to solar firms that acquire others, merge or reorganize.