NEW YORK (Dow Jones)--Solar stocks made gains Tuesday as the companies were lifted by reports that Suntech Power Holding Co. Ltd. (STP) is in talks to build a major solar project in China.
Analysts said other potential factors moving the sector Tuesday are a stronger euro, which tends to boosts solar shares, and gains in crude oil futures. Midday Tuesday, the euro was near its intraday high of $1.4030, as crude oil futures gained 2.2% to $69.60. The stronger euro tends to help the sector since much of the companies' sales are in that currency.
China-based solar stocks led the sector's gains Tuesday, with American depositary shares of Suntech up 7.9% at $18.28, China Sunergy Co. Ltd. (CSUN) up 14% at $5.88 and JA Solar Holdings Co. Ltd. (JASO) up 14% at $5.33. The solar sector has gained with the broader market in recent months on hopes the companies will be able to recover soon from a tough first quarter.
A story by a local Chinese media outlet that was widely circulated Tuesday said the Qinghai province of China has signed an agreement with Suntech to construct a 500-megawatt project, which would dwarf most existing solar projects in China.
Analysts said the news could be lifting solar stocks, since it could be an indication that other Chinese provinces will follow suit with additional massive solar projects.
Cowen and Co. analyst Robert Stone told Dow Jones Newswires that the fact that the Qinghai province is in talks to build a large ground-mounted solar project - as opposed to smaller roof-based projects - is an indication that the central government of China could also have similarly large projects in the works.
Suntech spokesman Steve Chadima told Dow Jones Newswires Tuesday that the project is in its very early stages, and he couldn't provide an estimate on when the talks would be completed. He said Suntech is aiming for the construction of project to be completed between 2010 and 2012.
He said the company had intended to keep the high-level talks internal for now, but somehow word leaked out in China and then spread across the world.
Chadima said the chances of the project remaining at its current large size are very high, and he added that the deal could be the first step in a much bigger project.
Hapoalim Securities analyst Gordon Johnson expressed caution about the potential Qinghai deal Tuesday, noting that the two parties still have to agree on key terms, including project financing and the overall size of the project.
Johnson, whose firm has an underperform rating on the solar sector, also expressed skepticism about the overall gains posted by the companies Tuesday.
"This is a very dangerous time to invest in the solar sector - the stocks are moving on rumor and speculation as opposed to fundamentals," Johnson said.
-By Jennifer Hoyt Cummings, Dow Jones Newswires; 201-938-2474; jennifer.cummings@dowjones.com
Analysts said other potential factors moving the sector Tuesday are a stronger euro, which tends to boosts solar shares, and gains in crude oil futures. Midday Tuesday, the euro was near its intraday high of $1.4030, as crude oil futures gained 2.2% to $69.60. The stronger euro tends to help the sector since much of the companies' sales are in that currency.
China-based solar stocks led the sector's gains Tuesday, with American depositary shares of Suntech up 7.9% at $18.28, China Sunergy Co. Ltd. (CSUN) up 14% at $5.88 and JA Solar Holdings Co. Ltd. (JASO) up 14% at $5.33. The solar sector has gained with the broader market in recent months on hopes the companies will be able to recover soon from a tough first quarter.
A story by a local Chinese media outlet that was widely circulated Tuesday said the Qinghai province of China has signed an agreement with Suntech to construct a 500-megawatt project, which would dwarf most existing solar projects in China.
Analysts said the news could be lifting solar stocks, since it could be an indication that other Chinese provinces will follow suit with additional massive solar projects.
Cowen and Co. analyst Robert Stone told Dow Jones Newswires that the fact that the Qinghai province is in talks to build a large ground-mounted solar project - as opposed to smaller roof-based projects - is an indication that the central government of China could also have similarly large projects in the works.
Suntech spokesman Steve Chadima told Dow Jones Newswires Tuesday that the project is in its very early stages, and he couldn't provide an estimate on when the talks would be completed. He said Suntech is aiming for the construction of project to be completed between 2010 and 2012.
He said the company had intended to keep the high-level talks internal for now, but somehow word leaked out in China and then spread across the world.
Chadima said the chances of the project remaining at its current large size are very high, and he added that the deal could be the first step in a much bigger project.
Hapoalim Securities analyst Gordon Johnson expressed caution about the potential Qinghai deal Tuesday, noting that the two parties still have to agree on key terms, including project financing and the overall size of the project.
Johnson, whose firm has an underperform rating on the solar sector, also expressed skepticism about the overall gains posted by the companies Tuesday.
"This is a very dangerous time to invest in the solar sector - the stocks are moving on rumor and speculation as opposed to fundamentals," Johnson said.
-By Jennifer Hoyt Cummings, Dow Jones Newswires; 201-938-2474; jennifer.cummings@dowjones.com