Sun Continues to Shine on Solar Stocks, ETFs

Solar stocks continued to climb on Monday, helping drive already strong solar ETFs even higher. News last week that a new agreement might help bring the trade war between the United States and China to an end and that newly installed solar capacity would outpace newly installed wind power helped solar ETFs continue their strong climb.

Solar ETF is Year’s Top Performer

The Guggenheim Solar Trust ($TAN) was up close to 3.5 percent in early trading, and the Market Vectors Solar Energy ETF ($KWT) gained almost 2.5 percent. Another day of gains pushed the Guggenheim Solar Trust to a new high in the midst of a year that’s seen the fund more than double in value. Guggenheim is the best-performing non-leveraged ETF in 2013, a year that’s seen solar panel companies rebound from a rough 2012.

Chinese solar companies leading gains

The gains for solar companies continued to lie primarily with Chinese manufacturers. Hanwha Solar Solarone (HSOL) lead gains as it climbed almost 7 percent, and ReneSola ($SOL) wasn’t far behind as it jumped over 4.75 percent.

Helping drive these gains was new analysis from Deutsche Bank (DB) analysts upgrading Trina Solar (TSL) and Yingli Green Energy (YGE) to buys with an $18 price target for Trina and an $8 price target for Yingli. Behind the upgrades was a belief that the Chinese government would continue to offer strong support its solar sector, possibly explaining gains across the segment for Chinese panel makers.

“Just like in the case of European solar sector, Chinese solar demand growth is currently driven by attractive project IRRs resulting from recently announced feed-in-tariffs,” said Deutsche Bank analysts.“IRRs for several utility scale projects are in the low/mid teensandlow cost project financing is made available as part of the central government policyinitiative to curb pollution/promote growth of the solar sector.”

They continued, expressing broad confidence in Chinese panel makers: “We believe Trina and Yingli along with the other large Chinese producers will remain well positioned to benefit from the momentum we see in the future in this market. While pricing has firmed up (~$0.58-0.60/watt) and stabilized, we see increasinglyattractive IRR’s from project development driving a fundamental shift from how the companies have done business. Relationships with government (on the national, provincial, and local levels)should enable these top tier companies to develop extensive downstream pipelinesover the next several years. Already, we are seeing evidence of increasing shipments and believe most of the top tier panel producers are at full utilization.”

Trina Solar gained just under 4 percent Yingli was up just over 1.75 percent.