Chinese Solar Energy Stocks May Carry Euphoria Risk

Chinese Solar Power May Cool Down
2007-07-16 - Sam Hopkins, Orbus Investor


They're both hot sectors: China and solar energy. Especially as China's energy appetite soars up, up, and away from what its traditional coal resources can provide alone, and the government encourages the development of clean energy, Chinese solar companies should be a bull's dream.

But my colleague Jeff Siegel, editor of Green Chip Stocks, urges caution. The traditional solar power technology he sees in China these days is ho-hum stuff at best. Even with the explosion of IPOs like Trina Solar and Yingli Solar in recent months, can Chinese solar tech truly go global? Volatility in stock prices of listed Chinese solar companies shows a rumbling of discontent among those in the know.

Jeff's on top of the international renewable energy market, and his Green Chip Stocks trading services are crushing market averages based on his painstaking research and honest appraisal. Check him out at www.greenchipstocks.com , and stay tuned for more from Orbus Investor on the ins and outs of international renewable energy.

Regards,

Sam Hopkins



Background on China's Booming Stock Markets; Is the Plateau a Forebear of a Slide?

China Bull Market Hesitates as Pork Prices Soar

2007-07-17 - Sam Hopkins, Orbus Intel

In China's big cities, maids are going back to work and casting their day-trading dreams to the wind. The number of new accounts for trading Chinese A-shares (the most basic stock available to retail traders in the Middle Kingdom) is dropping far from recent record highs.

Despite all the Wall Street hubbub about the Dow Jones Industrial Average hitting 14,000, the Shanghai Stock Exchange and its progress so far this year absolutely dwarfs the Dow and the more representative S&P 500 index:

But these exchange movements do not take place in a vacuum. The tension between economic growth and price fluctuation is being felt all over the world these days in a big way. Perhaps nowhere more than China, where a lack of elasticity in the local currency is putting pressure on local consumers as US legislators gripe for different reasons.

Legislators from both the Democratic and Republican parties contend that manipulation of the yuan, or renminbi ("people's currency") has assisted the loss of over three million American manufacturing jobs to China since 2001.

But from their offices on Capitol Hill they cannot feel the impact of China's rampant growth-it has consistently risen more than 11% per year-on the average consumer. While we complain about soaring fuel prices, China has caps on gasoline prices. Pork, however, is a different matter.

The wholesale price of pork rose by nearly 75% in June over the year before, the Ministry of Agriculture announced this Monday. That means that the majority of Chinese who not drive and do not use commoditized goods like metals and fuel are still getting thrown into the fire of sharp market movements.

Last year, record low prices led to increased slaughtering of young piglets and sows in order to depress supply. Then a contagion called blue-ear pig disease spread throughout the rural Yangtze River Valley this year, killing 27.5% of the swine that contracted it.

Such food price surges have resulted in corn tortilla riots in Mexico, where biofuel competes with bellies for the power kernels can provide. In China, the survivors of Mao's disastrous Great Leap Forward and other periods of famine are surely terrified to go back to such scarcity, and a generation raised on KFC and internet bars just won't accept state-mandated "sacrifice."

The Beijing government's National Development and Reform Commission fears China's own potential for food riots, urging local authorities this Monday to ban the establishment of new corn processing facilities to ease demand. Rice, wheat, and corn prices have all gone up by about 8% so far this year over 2006 levels.

As 300,000 new trading accounts were opened per day this spring during the peak of the neophyte frenzy, China's staggering 40% household savings rate continued to tick downward (though hopefully not all the way to the American nadir of -1%).

It is important to get China's new export-fueled wealth circulating, but the market is not for the faint-hearted. Take another look at the Shanghai Stock Exchange, this time by itself:

Notice that the market has wobbled since late May. This probably has the most significant impact on new account openings, since the strong springtime trend is what lured so many into their first share purchases. What this tells us is that the Chinese retail shareholder is fickle.

The lesson for us foreigners scoping out the Shanghai scene from afar is that China's barnyard is complicated. Bulls abound but they don't always feel like charging. Since China lacks a sophisticated derivatives market, investors either bet long or not at all.

Are you after smart money or just fast money? I would bet that few Chinese investors would be able to answer that question quickly, if they can even differentiate. In a land where a generation is often the difference between an oxcart and an Audi, more wild swings can be expected, but Chinese investors have certainly developed a taste for the market's meat.

Regards,

Sam Hopkins