Why Chinese Solar Stocks Are Popping Today

Why Chinese Solar Stocks Are Popping Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Solar stocks are surging again today, driven partially by the rising market, but also by hope that China and the EU will resolve trade differences. Yingli Green Energy is up 13%, JA Solar is up 11%, and Trina Solar , JinkoSolar , and LDK Solar have all been up over 10% today.

So what:Reuters and other news sources are reporting that the European and Chinese officials are close to a deal that would replace tariffs Europe put in place in June. The deal being reported is a limit of 10 GW of exports from China to Europe, with a minimum price of $0.65 per watt, although officials have said those numbers aren't exact and haven't been finalized.

Now what: The upside is that these limits would replace an 11.8% tariff now, which would rise to as much as 67% in August. So, the negotiated deal would lift that tariff, and may even increase margins by raising the prices Chinese manufacturers sell in Europe. The downside is that sales would be limited into China, particularly for low-quality manufacturers, who would be squeezed out by more desirable, high quality panels.

This is no doubt a positive, and may have some positive margin effects for the manufacturers who can grab the largest share in Europe. It will take a few quarters to see how that shakes out, but, for now, the entire industry is cheering.

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The article Why Chinese Solar Stocks Are Popping Today originally appeared on Fool.com.

Fool contributor Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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