Solar stocks rallied sharply on Wednesday, regaining some of the ground lost during last year's steep sell-off, on signs that prices for solar energy components were stabilizing.
Chinese solar companies Hanwha SolarOne Co Ltd HSOL.O, JinkoSolar Holding Co (JKS.N), JA Solar Holdings Co Ltd (JASO.O), Trina Solar Ltd TSL.N, Suntech Power Holdings Co Ltd STP.N and Yingli Green Energy Holding Co Ltd (YGE.N) led the jump, with gains of 23 to 41 percent.
Most solar stocks had plummeted more than 60 percent last year as prices for the panels that turn sunlight into electricity fell sharply, cutting profit margins for the companies that manufacture them.
Investors on Wednesday, however, cheered figures showing a dramatic rise in new solar installations in Germany in the fourth quarter and higher prices on the industry's key raw material, polysilicon.
Avian Securities analyst Mark Bachman said polysilicon was selling for about $30 a kilogram on the spot market after bottoming at around $24. He noted, however, that solar cell and panel prices are still dropping and said more companies will need to go out of business this year to ease the industry's massive oversupply.
"I'm not so encouraged by this today," Bachman said in an interview. "Investors will turn right around and start to sell these off again as soon as the two-day euphoria is over."
But Deutsche Bank analyst Vishal Shah said in note to investors on Wednesday that the industry's surprisingly strong fourth quarter in Germany and robust demand in Italy and the United States could benefit the struggling sector in the near term.
"Our checks indicate that inventory levels across the supply chain are now at record low levels and we believe record December month shipments (in Germany) is likely to create a sense of rush among installers" in the first half, Shah wrote.
Solar panel demand in China and India this year could also top industry expectations, Shah said, while the U.S. solar installers may seek to buy panels from Chinese manufacturers ahead of a possible import duties.
Other solar companies also rallied, including MEMC Electronic Materials Inc WFR.N, which was up 19 percent; SunPower Corp (SPWR.O), up 11 percent; First Solar Inc (FSLR.O), which climbed 9.7 percent; LDK Solar Co Ltd LDK.N which rose 15.8 percent; and Power-One Inc PWER.O, which was up 14.2 percent.
(Reporting By Matt Daily in New York and Nichola Groom in Los Angeles; Editing by Gerald E. McCormick, Gunna Dickson; Editing by Richard Chang)