Shares of China’s solar manufacturers surged this week, according to Bloomberg, fuelled by expectations that the government may intervene to manage production and address the oversupply in the market.
The rally began Tuesday amid speculation that the Ministry of Industry and Information Technology could soon issue guidelines to restrict polysilicon production.
Despite some scepticism from analysts at Daiwa Capital Markets and Citigroup, solar stocks have led gains on the CSI 300 Index, with Xinjiang Daqo New Energy Co. jumping 48% and Trina Solar Co. up 35%. Xinyi Solar Holdings Ltd. led the Hang Seng Index with a 34% increase.
“The recent news has addressed the supply-side problems of the solar industry,” stated Tebon Securities analysts Peng Guangchun and Bai Xin.
“Improving risk appetite may provide greater room for solar stocks to gain, bringing investment opportunities.”
Some stocks have now surpassed their October 8 highs, when new stimulus measures boosted market confidence. Key players like TCL Zhonghuan Renewable Energy Technology Co. and LONGi Green Energy Technology Co. are also showing technical patterns suggesting further gains.
If confirmed, the new policy could accelerate the phase-out of less-efficient polysilicon facilities and ensure that suspended capacity remains offline, according to Dennis Ip, an analyst at Daiwa Capital Markets Hong Kong Ltd.
Expectations for policy changes were heightened by news of an upcoming meeting between high-level officials and the China Photovoltaic Institution Association.
China’s solar industry has faced challenges in recent years due to overcapacity, which pressured earnings and led to share price declines. Major firms like TCL Zhonghuan and LONGi Green Energy both fell nearly 50% last year.
Optimism started building earlier this month when an industry body cautioned companies that undercutting competitors by bidding below cost could be legally questionable.
