More Details On China Solar Policy From Friedman Billings Ramsey

A hat tip to for these notes from Friedman Billings & Ramsey regarding China’s solar policy.  As you probably know the solars took off in a big yesterday, particularly the big China plays such as Suntech (STP) and Trina Solar (TSL). They ran on a report that China would be supportive of local solar development and offer subsidies but details have been fuzzy.

After some extensive checks with their contacts in China, FBR is clear that:

– there will be a cap of 180MW this year
– those in the government that they contacted don’t know the details
– there is uncertainty whether this is a one time incentive or one that would continue next year as well

Friedman believes that the best case scenario wouldn’t amount to much and that their is still considerable downside risk to current consensus estimates and that the big move yesterday was way overdone.  They are encouraging investors to take profits and/or short STP and TSL.

I’d have to agree  that yesterday’s move was way overdone, but consider this…  The solars closed in the upper half of the trading range with very heavy volume indicating a high degree of momentum.  Maybe they pull back considerably and retrace much of yesterday’s move, but money is clearly flowing in solars and pull backs will offer great opportunity.

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