China's $680B stimulus is boosting the economy faster than many westerners expected. Q3 GDP was 8.9% on a annual basis. It was reported that China may reach double digit growth in Q4 as the stimulus kicks in full speed. The second largest economy in the world may reach self sustainability in 2010. The G20 meeting over the weekend confirmed that stimulus around the globe will remain intact till 2011. As a result, demand for raw materials will pick up quickly both in China and here in US.

One on the materials that is in strong demand is metallurgical coal. Part of the reason for that is China doesn't produce high quality metallurgical coal and the domestic production is really low volume, and it depends on import from Australia and US to meet its demand. High quality steel products need high quality metallurgical coal. Earlier this year, China's Chinalco tried to take stake in Rio Tinto (RTP) to lock the supply of iron ore and metallurgical coal from Australia. However the deal didn't go through as Rio Tinto turned to BP (BP) for help on its funding shortage.

Thursday, a report said Democrat Senator Schumer called to restrict the stimulus funds to be used in the 600MW wind farm joint venture in Texas, which is made up of A-Power Energy Generation (APWR), U.S. Renewable Energy Group and Cielo. A-Power owns 49% of the JV. The project is expected to get funding from the Commercial Bank of China (around $1.05B) and $450M from the US stimulus package. So Sen Schumer is supporting President Obama's policy to develop renewable energy, but assails the $450M being taken from stimulus. His reason is simple: the $450M will be used to create jobs in China, not in the US. Well, it looks that way, however, he ignores that $1.05B will be from China. China is financing the major part of the project! Let me list a few facts that prove Sen Schumer is not seeing the full picture here.

1. A-Power formed a joint venture with General Electric (GE) to develop wind turbines earlier this year. According to the announcement, GE owns a majority stake in the business that will serve as GE Drivetrain Technologies' Southeast Asia manufacturing center starting in mid-2010. Now it is clear that turbine shipped from A-Power is at least 50% owned by GE. In other words, China's $1.05B investment in the 600MW project is going to create jobs associated with GE.

First Solar (FSLR) reported Q3 earnings with revenue down from $520M of Q2 to $480M, however the company beat on EPS by 0.05c margin. The company raised 2009 guidance to $1.975B to $2.025B from previously announced numbers.

One positive movement in the solar sector is that inventory is getting lower according to FSLR's CEO. The inventory depletion is across the whole solar sector, which is positive for the rest of the industry. For the rebate program, it is not working as expected according to the company. It is likely Chinese solar names are gaining market shares in Europe because company like Trina Solar (TSL) and Solarfun Power (SOLF) raised shipment guidance for Q3 a few weeks back. The cost base is much more competitive for Asian solar companies. Overall First Solar presented a mixed earnings report (conference call transcript here).

Last Thursday, the world learned China achieved 8.9% in Q3 based on year over year, while for the first three quarters the nation achieved 7.7% GDP growth year over year. Having said that, China needs to achieve at least 8.9% in Q4 to reach their average 8% growth for 2009, which means the massive stimulus policy needs to stay for Q4 at least. It was reflected recently in a speech by Premier Wen Jiabao. Chinese Premier Wen Jiabao pledged to continue his government's aggressive stimulus efforts on the World Economic Forum meeting in China last month. The Chinese leaders know that stimulus needs to stay well into 2010 to sustain the growth before the economy can grow itself.

China's $700B stimulus was largely spent on building infrastructure, such as the high speed railway across the nation. As a result, steel demand, hence the metal coal from overseas are sky rocketing. Both Peabody Energy (BTU) and Alpha Natural Resource (ANR) are seeing strong demand from China. The metallurgical coal demand is growing as China uses it to produce steel domestically. China is not importing steel from overseas, which is reflected in the weak demand in international steel names, such as US Steel (X), Nucor (NUE) and ArcelorMittal (MT). Building the high speed railway and other infrastructure will keep the demand of raw materials such as metallurgical coal growing in the next 5 years.

Governor Arnold Schwarzenegger approved a new subsidy for solar power on Monday and joined forces with the federal government to fast-track renewable energy projects. This is on top of current solar incentives, hence it is huge for the industry. California support on solar energy has drawn many companies open office in the state.

Solarfun (SOLF) opened Solarfun USA in Southern California city Torrance, expecting to get a piece of the pie in the world's eighth economy, the company already raised Q3 shipment to exceed 100MW. Trina Solar (TSL) also sees module demand picking up, and the company opened US office earlier this year. Schwarzenegger also signed an agreement with the U.S. Department of the Interior on Monday to speed development of up to 7,000 megawatts of large-scale renewable energy projects.

While China's President Hu is in the United States laying out the nation's ambition to tackle global warming, a tone that you can not find in other leaders' speeches, Premier Wen Jiabao is hosting a conference with the nation's top economists to pledge more investment in low-carbon industries, such as renewable energy, and next generation automobiles. China apparently is looking for a new spot to lead the world for the decades to come. These new industries include solar power, wind energy, nuclear power, and automotive, etc.

Wall St. didn't expect solar companies to raise guidance for Q3, however on last Thursday Solarfun came out, becoming the first Asian solar name to raise Q3 guidance, Q3 module shipment to exceed 100MW. The company expected a maximum 100MW in Q2 earnings report. It is no surprise if you look back at how many solar farm projects have been signed in the last 6 months in China. As I mentioned in my last article, Asian solar names are experiencing better sales in Q3 and Q4 in Asia and Europe, as a result, more upward guidances are expected from names with good management team, such as Solarfun, Renesola (SOL), JA Solar (JASO), Trina Solar (TSL) and Suntech power (STP).

Investors, especially professional investors, were worried about UNG's 11% premium over its natural gas price in the last week and hesitated to put money into UNG. For example, Cramer on CNBC once mentioned to sell UNG because of the premium. Many retail investors who watched his show sold the next day, and they may actually have sold at the bottom if they didn't buy back the next day when premium started to close.

Here is what happened this week. On Monday, natural gas was up almost 10% and UNG was merely up 3% (meaning 7% premium closed for that day). On Wednesday, natural gas price was up again 11%, and UNG was up only 6%. If you add these two day gaps together, UNG's premium over natural gas has actually closed. UNG should start to track natural gas prices from here.

Last Thursday Collins Stewart raised Yingli Green's (YGE) price target based on strong demand in recent weeks. Yingli customers have indicated that the company has exhausted capacity which means new orders will pick up going forward. In the Q2 conference, Yingli also signaled that demand for the rest of 2009 is strong in both U.S. and Germany. China's domestic market is also picking up at a faster pace. Goldman Sachs also placed Renesola (SOL) on its "conviction buy list" 3 weeks ago, citing the new business model as generating more revenue. As China's central government indicated more policy support on solar energy over wind, and also with China's latest strong economy data (industrial output rose 12.3% versus 10.8 expectation), we would not be surprised to see a new wave of upward guidance from Yingli and some other solar names such as Renesola, Solarfun (SOLF), Suntech Power (STP) and Trina Solar (TSL) as these are strong players in the sector. Here are some upbeat comments from these companies recently:

Renesola: the company signed a 600MW deal with JIangsu province and in the recent conference call the CEO said demand is picking up for Q3 and Q4, and the previous guidance does not include revenue from domestic sales. Its Golden Sun project submitted to government is expected for approval in Q4. I expect earnings to surprise wall street to the upside.

It is obvious that Asia's PV market is heating up not only in China, but also in Japan. According to Japan's Kyodo News agency report, Sanyo Electric (SANYY.PK), Sharp (SHCAY.PK), Mitsubishi Electric and another 24 solar cell manufacturers in Japan reported second-quarter sales of solar cells in Japan rose 82.5 percent year over year to 830MW, a record high. The new-to-power Democratic Party has decided to implement a new policy for the power companies to buy up the electricity generated by home solar power generation systems. It is reportedly believed that the new government has pledged to speed up the green revolution along with China, and solar energy will be one of the industries promoted under the new administration.

Under the new initiative passed by the Chinese congress, China has set a goal of 20GW in solar energy by 2020. Many companies have signed mega contracts with local governments, with sizes ranging from 100MW to 600MW. On Tuesday, China granted a solar farm contract to First Solar (FSLR), and the company has agreed to built a 2GW solar farm in Inner Mongolia by 2019. The latest winner is China's Solarfun (SOLF), which signed a 600MW contract to build a farm that is adjacent to First Solar's 2GW farm. China has set Inner Mongolia as the solar energy base for providing electricity to the entire nation. It is expected that Solarfun (SOLF) and some other Chinese solar names will get more contracts down the road. Companies such as Renesola (SOL), JA Solar (JASO), Yingli Green (YGE) and Suntech Power (STP) are gaining ground in the Chinese solar market. Goldman Sachs has put Renesola in the conviction buy list due to its improving business model and the potential. The following is the listed of companies who recently signed mega contracts:

Wind energy development in China has doubled in China in 2008, according to the director of Ministry of Industry and Information Technology Equipment Industry Division, Zhang Xiang-mu, who recently authored an article on Renewable Energy China. Zhang called for a brake on wind energy development because of the lack of grid electricity transportation. Overcapacity in the wind energy industry is even worse than in the solar industry, Zhang said. He estimated that the number of companies involved in wind energy increased from 6 to 70 in 2008, and production capacity will reach an annual output of 35-40 million kilowatts.

Zhang said China's wind farm construction speed may be maintained at the annual installed capacity of 10-15 million kilowatts. As a result, some of the companies face tough competition and reshuffling in the industry is inevitable in the near term. A-Power Energy (APWR), a US-listed company, tripled its stock price on the expectation that China will speed up wind farm development and expanded capacity to 2GW by 2010. However, with the brake call by the Ministry of Industry and Information Technology, the demand for turbines may slow down significantly in 2010. The last few quarters' earnings are rather disappointing, as no wind turbines, aside from two samples, have actually been sold.

For Renesola (SOL) and LDK Solar (LDK) investors, the worst is yet to come. China's poly-silicon production increased dramatically in the last 12 months and two new companies just started to produce poly-silicon last month.

U.S.-listed solar wafer makers Renesola and LDK Solar are facing tougher and tougher competition, their futures have now dimmed further since two more companies in China announced plans to produce poly-silicon wafers: Puhong new energy Corp and Shengte new energy Corp. Puhong is expected to produce 1500 tons of poly-silicon by 2010 (a capacity compatible with Renesola's). Puhong won the bid in China's first 10MW solar project according to the China's official renewable energy website.

The economy is recovering and the stock market is picking up. It is time for TD Ameritrade (AMTD) and Charles Schwab (SCHW) to grab more market share. One acquisition target recently talked about is E*Trade (ETFC).

E*Trade has been under pressure due to its mortgage business. The stock is trading a little over $1.5 on Friday. Wall Street investors piled in to short the stock since 2008, and according to Nasdaq short interest report, ETFC has over 36% short interest as of 8/28/09, the highest among the SP500. However, several positive things are happening with this company for the moment. Its debt conversion program was approved by shareholders, housing prices are coming back slowly (a likely boost to its mortgage department), and trading actiivity is picking up speed lately, which usually is a good sign that its core business is in good shape.

Yingli Green Energy (YGE) reported a strong quarter on Tuesday, however the share price was hit early in the morning by the weak market sentiment. It recovered most of its losses later that afternoon (conference call transcript here). Revenues totaled $219.5 million, up 50% sequentially. Excluding a one time charge, the company recorded a net income of $17.5 million, or 14c a share, compared to 4c a share analysts were expecting.

CEO Liansheng Miao indicated the quarter marked a 72% rise in shipments from the first quarter and company seeing better project financing and demand down the road in 2009. The German market is the key driver. He also said the US market has been picking up pace in recent months and expects growing market share in coming quarters as demand for its PV module is increasing. Last week, Renesola (SOL) and Canadian Solar (CSIQ) also said they expect to see higer demand for the next few quarters, and a resultant sequential revenue increase is expected as a result.

Insdier selling is usually a sign that a stock may have peaked in short term especially after a tremendious run without fundamentals. Priceline.com (PCLN) is such a company, the stock is trading all time high 1 week ago over $150 a piece. The stock has doubled from $70 in March. Insiders have been selling aggressively since then if you look at the following chart from Etrade statistics and SEC filing. Some insiders sold over $5M stocks in the last 2 weeks when the stock price hit all time high.

click to enlarge

Credit Suisse on Thursday upgraded ReneSola (SOL) based on its improvement in earning and outlook. On Wednesday, ReneSola kicked off earning among Chinese solar names. The company reported 5 cents loss, beating the Street consensus of 6 cents per ADS,

The important development in this company is that the company converted itself into a vertical intergration PV maker from a pure solar wafer provider. China PV makers such as Canadian Solar (CSIQ), Yingli Green (YGE) and Suntech (STP) all gained momentum to scoop up market shares in China, Europe and the U.S., forcing First Solar (FSLR) to start a rebate program to face the competition. According to CEO Li, ReneSola sees a sequential increase in revenue by 60-70% quarter over quarter for the 3rd quarter, margin improved from -47% to positive 5.1%; the company announced 2009 guidance of $500 million to $550 million.

Priceline.com (PCLN) reported good earnings last quarter, excluding items, the company earned $2.02 per share in the latest quarter. The company earned $67 million, or $1.38 per share, up 35 percent from $49.8 million, or $1 per share, in the same period a year earlier. However the company market capital reached $6.4B, trading at all time high. According to Yahoo finance, Priceline's trailing P/E is at 34.95. This is a warning sign that the stock price may be running ahead of itself.

With all airlines reporting a lack of travelers, investors have reasons to believe the current quarter may disappoint. Its competitor Expedia.com (EXPE) has a revenue of $2.8B, which is 50% larger than Priceline and is trading at the same market cap. Expedia 's gross margin is 78.8%, while Priceline's gross margin is only 50%.

China has been rolling out policy to support renewable energy industry in the last 12 months. The nation set target of 17% of electricity in 2017 needs to be generated from renewable sources, such as wind and solar. The wind energy is reportedly to reach 3% by 2017.

China also set up feed-in tariff for solar farm projects, and will cover 50% of the development cost of any solar farms. So far, the domestic companies such as Renesola (SOL), Suntech (STP), Yingli Green (YGE) and solarfun (SOLF) will benefit from the policy. U.S. competitors such as First solar (FSLR) and Sunpower (SPWRA) are not eligible for the moment, although the government may extend the support to overseas companies. On the other hand, U.S. commercial rooftop BIPV demand picked up in recently months, company like Energy Conversion Devices (ENER) are ramping up production and tied knot with Johns Manville (JM), a leading global manufacturer of an extensive line of energy-efficient building products, to deliver PV system to commercial rooftops. It is believed that First Solar also entering rooftop BIPV market either by an acquisition or developing its own technology.

Reuters reported last week that the aggregated incentives for solar production could bring $10 billion in capital to the industry over the next three years. This is just a latest piece of the puzzle for western investors to put together to see the whole picture of solar industry in China.

Among the massive economic stimulus plans and clean energy initiatives, China and the US are the top two players. In mid-April, China's Ministry of Housing and Urban-Rural Development announced a stimulus plan for BIPV applications, offering RMB 20/watt for construction material- and component-based BIPV projects and RMB 15/watt for rooftop- and wall-based projects. The ministry accepted applications for an initial round of subsidies until May 15. The number of projects applying for the subsidy has greatly exceeded the government's expectations based on the report from DiGitimes exceeding 500MW in total capacity. The Second round of applications is expected to close by Mid-August.

During the last six months, the Chinese government has planned massive solar projects ahead of the Obama administration in the U.S. Wall Street can hardly obtain first hand information because of the communication obstacle between the east and the west as language is a major cause of the delay. Many westerners rely on the translation from media such as Tawain's DiGitimes, and JML Pacific Epoch, a research firm located in China that publishes in English.

Back in Jan 2009, the Qinghai province Haixi region rolled out the world's first 1GW solar farm project. Suntech power (STP) has been reportedly selected for the first 400MW, ReneSola (SOL) and JA Solar (JASO) are likely to win 200MW each, to reach 80% of its 1GW target (note: none of the companies have officially released any contracts yet). Many other Chinese solar companies are also competing for the rest of the 200MW - companies such as Solarfun Power Holding (SOLF), Yingli Green (YGE), Trina Solar (TSL).