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Investors who favor emerging markets such as Chinese markets will
become more confident as Beijing signaled on Wednesday that it will
allow the Yuan to appreciate against the greenback (well actually
against a basket of currencies). This is seen as a boost to exports of
US and EU companies as a stronger yuan makes goods cheaper for the
Chinese people, which is a big positive for the US market preparing for
its next leg up for the months ahead.
The sector which will benefit the most is the renewable energy sector, particularly companies whose businesses are growing in China. Revenue of Asian renewable energy companies will get a boost when China's strategic Golden Sun project and wind farm projects kick off later this year. These projects are targeting to achieve the nation's 20% electricity generated from solar and wind. When revenue is received in yuan and reported in USD, investors may see surprising earnings for the coming years. The following companies are growing business aggressively in China as the local government strongly supports them.
A-Power Energy Generation (APWR): The company is ramping up wind turbine capacity rapidly to meet demand in the Chinese and international markets. The pace of signing contracts is picking up recently - for example, 49MW inner-mongolia wind farm (to be completed in mid 2010) and 20MW wind farm in Shangdong province (to be completed in Nov 2010). The company will reach an estimated capacity over 2GW in 2010.
Suntech Power (STP): The company has reached a deal with the Chinese government to develop over 1GW in solar farms so far this year. Although Suntech has a majority of its sales overseas so far, domestic demand is picking up speed.
Solarfun (SOLF): Solarfun is expanding its domestic market aggressively as it works together with local government to develop solar farms. A 600MW contract was signed earlier this year with the Inner Mongolian government. Management has raised Q3 earnings not long ago due to increased shipping of panels.
Trina Solar (TSL): Trina may be doing the least business in Chinese markets as it reaches out to Germany and Italy, but Euro appreciation also benefits the top line.
First Solar (FSLR) : First Solar entered the Chinese market with a 2GW contract with the central government. This is going to serve as a seed to grow in China.
Disclosure: Long FSLR, APWR, SOLF.
