Solar ETF Drops Most in Four Months as China Rattles Sector
Comment of the Day

September 29 2021

Commentary by Eoin Treacy

Solar ETF Drops Most in Four Months as China Rattles Sector

This note by Michael Bellusci for Bloomberg may be of interest to subscribers. Here it is in full:

Invesco Solar ETF (TAN) falls as much as 6.5% intraday, the most since May 4, amid growing investor jitters about China’s real estate crackdown potentially sparking a financial contagion. 

Among individual stocks, JinkoSolar down as much as 10.6% during the session, Beam Global -9%, Daqo New Energy -10%, First Solar-9.3%, Canadian Solar -7.8%

Eoin Treacy's view

China is by far the largest manufacturer of solar panels. Silica is a major component for the sector and production is being hampered by electricity supply disruptions. That’s taking a toll on the solar sector. At the same time the upward pressure on government bond yields threatens the business model of many domestic installation businesses.

The Invesco Solar ETF (TAN) soared in 2020 and experienced a deep reaction in the first half of 2021. It has been ranging in the region of the trend mean for the last few months and is back testing the lower side of its range. A clear upward dynamic will be required to check potential for additional downside.

Silver is also a major component for the solar sector so it has not been immune to selling pressure. The price broke lower today and will need to rebound emphatically to defray potential for a further test of underlying trading.

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