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Solar ETFs Jump on JinkoSolar News, Ignoring First Solar Decline

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December 7, 2012 2:11 pm
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Shares of the Market Vectors Solar Energy ETF (NYSE: KWT) are higher by 2.4 percent today on volume that is already about 75 percent higher than normal after the China Development Bank pledged to give as much as $1 billion to the Swiss unit of ailing Chinese solar firm JinkoSolar (NYSE: JKS). That news was reported Bloomberg earlier today.

News of the funding from China Development Bank sent shares of JinkoSolar higher by 14 percent and sparked a rally across the beleaguered solar space. The Guggenheim Solar ETF (NYSE: TAN), the larger of the solar funds by assets, is also trading higher by nearly 2.4 percent.

Arguably, the JinkoSolar news has prompted an excessive amount of Friday bullishness in the two solar ETFs. JinkoSolar, a microcap maker of photovoltaic products, accounts for relatively small percentages of each ETF. Yes, it is a top-10 holding in TAN, but its weight in that fund is less than 4.5 percent. In KWT, JinkoSolar has a weight of just 2.4 percent, meaning that in that ETF, the stock is larger than just six other holdings.

Noteworthy is the fact that FirstSolar (NASDAQ: FSLR), the largest U.S. solar company, is off four percent today. That stock accounts for 16.3 percent of KWT’s weight and almost 11 percent of TAN’s weight.

With JinkoSolar sparking a rally in Chinese solar names ranging from Trina Solar (NYSE: TSL) to LDK Solar (NYSE: LDK) to JA Solar (NASDAQ: JASO), investors appear to be glossing over the fact these are micro-cap names, bidding KWT and TAN higher in the process.

Year-to-date, KWT and TAN have each lost about 42 percent and that is with both ETFs employing reverse splits aimed at artificially boosting their share prices.

For more on ETFs, click here.

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