August 4, 2011 / 4:51 PM / 8 years ago

Wind power shares fall on policy risk-HSBC

 LONDON, Aug 4 (Reuters) - Wind company stocks were
undervalued but could fall further, HSBC analysts said on
Thursday, as the risk of further fiscal tightening weighed on a
sector which depends on government support.	
 All renewable energy sectors have lagged fossil fuel energy
and wider global stocks over the past month and the year to
date, data show, underperforming even as world shares slide on
concerns about sluggish global growth.	
 Alternative energy is vulnerable in a downturn for a range
of reasons, including technology risk, a lower ranking of green
concerns, dependence on subsidies from cash-strapped governments
and falling prices for competing fossil fuels. 	
 After sharp share price falls wind stocks were now
undervalued, said HSBC analysts, given rising order inflow and
order backlogs, but further drops could be expected.	
 "We believe the debt crises in the EU/US have heightened
as-yet unfounded prospects of further regulatory uncertainty and
possible credit tightening," said the bank's Global Wind report.	
 "While we feel these stocks are undervalued, we expect
continued flat or underperformance, while macro concerns
persist, with investor appetite poor for what is considered a
risky sector in weak markets."	
 The global wind market fell last year, meaning fewer
turbines were installed than in 2009 reversing a 20-year trend
after the financial crisis slowed demand and froze capital.
 	
 But order inflow for major wind turbines in the first half
of 2011 was up a fifth on the same period last year, while the
combined order backlogs had roughly doubled for major
manufacturers Vestas , Gamesa , REpower 
and Suzlon , HSBC said.	
 Wind power still struggles to compete with cheaper natural
gas, and depends on government support in the form of a price
premium called a feed-in tariff. 	
 Solar power is far more expensive than fossil fuel
alternatives. Italy was the world's second biggest solar power
market last year and in May capped solar subsidies at 6-7
billion euros annually by 2016. . But Rome is
currently in the throes of market doubts over the size of its
sovereign debt. 	
 Click here for a factbox of green energy support:
 	
 The table below shows that wind and solar have
under-performed other energy and wider stocks in the past month
and in the year to date, compared with Thursday's prices. 	
  	
 ASSET                                    PCT CHANGE     
                                                   
                                       LAST MONTH  YTD
 European coal           <ARACIF90DY=ARG        2.19   -4.51
                      >                            
 S&P Global Nuclear                   -7.53  -13.90
 DJ Global oil & gas                  -8.42   -1.09
 MSCI World              .world              -8.83   -4.01
 HSBC Climate Change                 -10.28   -9.64
 NASDAQ Global Wind                   -12.30  -12.99
 HSBC Energy Efficiency             -13.12   -8.60
 FTSE Env Opportunities             -14.92   -7.35
 MAC Solar                          -17.87  -19.95
 S&P Clean Energy                 -18.34  -16.09
 	
	
 (Reporting by Gerard Wynn)	
 
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