Principles of the Stock Market

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Have You Seen This?

Have You Seen This?

GLOBAL VIEW.  China’s Growing SOLAR Niche.  China’s domestic-investor only stock market, the Shanghai Stock Exchange Composite continues to rise.  Looks like Chinese investors are setting themselves up for more trouble after the Shanghai exchange rose some 514% from mid 2005 to October 2007, then fell -73% through October 2008.  But before that next collapse happens, I see Chinese solar stocks as good buys here.  Let’s review the larger picture first, then I’ll talk China and renewable energy.


Asia Bottomed Five Months Back?  Remember ASIA in general hit its last bear market lows back last year.  China, Hong Kong, India, Japan, Korea, Indonesia, Malaysia and the Philippines all last hit lows last October, along with some Latin American developing markets like Brazil and Chile.  That’s six months ago thus way past the normal three weeks to three months counterswing rally time frame.  So is  Asia in a new mini bull market?  Other regions of the world, meaning the US and CANADA and most all of EUROPE continued lower until just last month.  So by my Principle of Relative Strength, which recommends always (almost) focusing on those countries, markets, individual stocks showing relative strength or outperformance, Asia in general is the area for us to concentrate our attention on today.  I previously wrote last Wednesday and Thursday how well known Bob Prechter, Jr. and his Elliott Wave International advisory service says parts of Asia are now in a big bear market RALLY phase in the cycle.  Like an A wave back up which can be powerful, long lasting and sizable.  And I also pointed out how “hot” and well known, Swiss investor Marc Faber is now saying buy Asia on any “setbacks” (there hasn’t really been any).  And I ended last Wednesday’s report with a buy recommendation on India, offering up as one way to trade or invest, the India Fund (symbol IFN) which closed Wednesday at 18.25.  IFN closed yesterday at 20.69.  So in general Asia is where the best action is now.  Plus regular readers will remember even before that, back on February 10th,  I recommended investing in Chinese agricultural and offered up a list of stocks which you could choose from (I bought one of the 13 stocks listed; did you buy any?).  Plus a few days prior to that, I went to great effort and posted the whole 100 stocks separated by industry sector on the USX China Index for you to print out, keep and go shopping from.


China In A Sweet Spot.  That’s because the Chinese government, with it’s unique, command-style quasi-free marketplace, blending capitalism and government management still has great and speedy influence.  They can rapidly decide on a, any, direction for the country and quickly move down that path.  Not like us here in America with our democracy.  We take lots of time getting any bills passed (but when we do agree on a new law, we get better if not implementation).  Of course, China still has to fight its widespread corruption and pay offs at every step forward so their implementation is harder.  Still, perception is everything in the short term in the stock market so implementation problems aren’t a concern over the near term.  And near term the Chinese government has just changed the laws to encourage solar (and other renewable energy like wind energy use).  Back on March 26th  China “introduced a subsidy for solar projects of more than 50 kilowatts that could pave the way for increased sales of rooftop systems.”  One analyst projected that this change could increase solar demand this year by 58 megawatts and 232 megawatts annually by 2012.  This announcement moved Chinese solar stocks up the most ever in one day and the rally in Chinese solar is now in its third week and still looks solid.  One London analyst said after the announcement that:  China has the potential to double the solar market, soak up the excess capacity that’s out there, and get manufacturers back on their expansion plans.”  Another report said:  China is closing older coal-fired plants and implementing clean energy to fuel economic growth.”  The government itself said its going to implement its “solar roofs program” to accelerate the application of  solar energy.  Schwartz View:  Good for you China!  Just lead by example, that’s the way to do it.  Don’t worry about what other countries are doing.  (What we should do here in America too regarding renewable energy.)   A more recent announcement says China is writing a new renewable energy law and on that news solar and wind stocks jumped again.  The essence is that China wants to increase renewable energy usage to 10% of total energy consumption by 2010 (from 7.5% in 2005).  Go China Go!

BUY CHINESE SOLAR.  Net, net, I recommend buying Chinese solar!



                                                                                Mkt        Analyst  Next

Symbol   Company Name                    Price      Cap         Ratings  EPS        Business Line

STP         Suntech Power Holdings    14.49       2170m     7-12-11   5/21/09   China’s largest solar manufacturer

YGE        Yingli Green Energy             7.67         964m       7-6-2       5/15/09   PV modules and PV systems

LDK        LDK Solar Company            8.04         928m       1-8-5       5/12/09   Multicrystalline solar wafers

JASO      JA Solar Holdings                3.58         589m       6-7-4       5/11/09   Solar cells

TSL         Trina Solar Ltd                      13.21       388m       3-6-4       6/5/09     Solar-power products

SOLF      Solarfun Power Holdings    4.73         252m       0-3-5       5/21/09   PV modules

Disclaimer!  I own a small amount of Yingli Green Energy but can and do change positions without notice.

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Posted 04-14-2009 8:20 AM by Richard Schwartz