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.

The complete list of Chinese ADRs traded on U.S. organized exchanges is listed below:

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.

Thursday’s stock market sell-off could finally be the start of the sharp Fall correction I have speculated about in various forms for months now. The extent of the technical damage and the heavy distribution of stock certainly seem to have put a ceiling on stock prices for now. Solar stocks were heavily hit as speculative stocks tend to experience aggressive selling in this kind of market backdrop. For some solar stocks, Thursday was just a continuation of on-going weakness, and for others, Thursday marked a definitive change in the chart technicals. It is interesting to observe how many solar stocks remain stuck within multi-month trading ranges.

The following list tallies some of the technical damage and identifies my latest thoughts on any potential opportunities. Again, the increasing risk of a sharp sell-off in the stock market is the biggest risk factor for any potential longs. (In the interest of space and time, I only posted one chart. Stocks are listed in descending order of Thursday’s price performance).

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).

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:

Q2 2009 Earnings Call

August 18, 2009 8:00 am ET

Last week HedgeTracker.com released its list of Top Solar-Focused hedge funds by percentage of assets. This week we look at the top hedge funds based on their total investment in the solar sector. The only hedge fund to make both of HedgeTracker’s lists is Partner Fund Management.

The top solar hedge fund investor is Lee Ainslie’s Maverick Capital. Mr. Ainslie is a “Tiger Cub,” or a former protégé of Julian Robertson of Tiger Management. As of Q1 ’09, the fund had $180.33mm of its $5,529mm, or 3.26% of its portfolio, invested in solar. However, the firm is not necessarily a believer in the solar sector overall, as the firm’s solar exposure is entirely concentrated in First Solar Inc. (FSLR) with 1,358,902 shares. Notably, over the first quarter, the firm purchased $85.29mm or 642,756 shares of FSLR.

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.

Sentiment

The major averages are lower Thursday, as early gains in the financials weren't enough to offset weakness in other sectors like energy and technology stocks. AmEx (AXP) is up 3.4 percent and the best gainer in the Dow Jones Industrial Average after the company said conditions in the credit card market were seeing some long-awaited signs of improvement. However tech stocks were weak after Cisco Systems (CSCO) reported so-so earnings, and commodity-related names are lower on sluggish trading in the crude oil and metals markets.

Trading is also cautious ahead of tomorrow's key jobs data. On Thursday, the Labor Department reported that weekly jobless claims fell by 34,000 to 550,000 in the week ended August 1. The number was much better than economists had expected. They were looking for a drop of only 4,000. Yet, while the claims numbers were strong, sentiment remained cautious ahead of Friday's numbers, which are expected to show the economy losing 330,000 jobs in July and an unemployment rate of 9.6 percent.

HedgeTracker.com has released its latest list of Top Solar-Focused hedge funds, and the Q1 2009 list includes a few newcomers: Partner Fund Management, Cavalry Asset Management and Prescott Group Capital Management. The funds selected for the list had the greatest percentage of their US equity assets under management invested in US-listed Solar Stocks as of 3/31/09 (see complete list of stocks below).

Telecommunications

• NTT DoCoMo Inc. (DCM) bought a 35 percent stake in NextWave Wireless Inc's software unit PacketVideo for US$45.5 million to strengthen its music and video services. DoCoMo is shoring up its contents services to fight subscription flight in a cut-throat and saturated market. DoCoMo aims to secure its partnership with PacketVideo, which already supplies the carrier with software to replay music and videos, ahead of the planned launch of its next-generation "Long Term Evolution" (LTE) services in December next year.
• NTT Communications Corporation (NTT Com), the wholly-owned subsidiary of Nippon Telegraph and Telephone Corp., and Integralis AG, an international provider of IT security services, announced the signing of a Business Combination Agreement and as part of this agreement, NTT Com agreed to launch a voluntary public takeover offer for all outstanding shares of Integralis. NTT Com offers 6.75 euro (US$9.4) in cash per share. The offer price represents a 70 percent premium over the three-month average closing share price on the Frankfurt Stock Exchange (Xetra) prior to the date of this announcement and a 35 percent premium over the closing price (Xetra) on 29 June 2009. Based on the number of Integralis shares outstanding, the offer would represent an equity value for Integralis of approximately 75 million euros (US$104.5 million). NTT Com has already secured irrevocable undertakings from key shareholders including all members of the management and supervisory board of Integralis, representing approximately 30 percent of the company’s voting rights.
• NTT DoCoMo Inc., Japan’s largest mobile-phone operator, aims to ship as many as 1 million smart phones in the country this year, helped by the release of a model running Google Inc.’s Android operating system. The company targets capturing half of the country’s market for smart phones, estimated to be between 1.5 million and 2 million units in the 12 months ending Dec. 31, President Ryuji Yamada, 59, said. Tokyo-based Kagawa estimates smart-phones will comprise less than 10 percent of total wireless-handset shipments in the country this year. DoCoMo will begin selling an Android handset made by Taiwan’s HTC Corp. on July 10 to compete with Apple Inc.’s iPhone offered by rival Softbank Corp
• Huawei Technologies has announced that the company has set up a long-term development lab in Tokyo, Japan. The lab will not only be used as a research and development center for LTE technologies, but also will provide testing and training facilities for the implementation and commercialization of the next-generation wireless technologies. In addition, Huawei's research team will be able to complete product tests with Japanese operators before delivery of new systems. Yan Lida, a representative from Huawei Japan, said that Huawei is glad to show its latest LTE testing technologies to clients in Japan. With the new lab Huawei and its partners can start to deploy the commercial use of the LTE network at any time. With the top innovative and training conditions provided by the lab, Huawei hopes to aid its Japanese clients in the research and development of LTE solutions.

Internet

• DeNA Co. will take a 50 percent-plus stake in British firm Waptx Ltd., turning the operator of a Chinese social networking site for cell phones into a subsidiary. DeNA will buy some 8.73 million shares in the British company this month via a private placement of shares. Through two fully owned units in Shanghai, Waptx has partnered with a local social networking service firm and together they run China's largest mobile social networking Web site, which boasts some 9 million users. DeNA intends to use its portal site content and expertise to expand its social networking business. Although DeNA currently provides mobile social networking services in China, it is struggling with just a few hundred thousand subscribers. In order to focus resources, DeNA could merge its own offering with Waptx's service.

Semiconductor

• Tokyo Electron is in no hurry to buy another semiconductor equipment maker as it seeks to develop new products and increase it market share. Tokyo Electron's clients, which include chipmakers Samsung Electronics and Toshiba and foundry TSMC, are just starting to invest in new equipment after a prolonged downturn. Takenaka, who in April inherited a company headed for a record operating loss this year, denied that the firm was looking immediately to expand its partnerships with equipment makers such as Novellus or ASM International. Tokyo Electron is focusing on raising its market share in areas where it has yet to secure top share, such as in etchers, where it competes with Lam Research Corp and Applied Materials.
• The CEO of Japan's Elpida Memory Inc. (ELPDF.PK) said that technology partner Taiwan Memory Co (TMC), which is backed by the Taiwan government, was seeking a stake of about 10 percent in Elpida. The government will invest some US$310 million in Elpida, part of US$1.7 billion in financial aid that includes loans from private banks to shore up the loss-making chip maker. On a separate matter, Elpida stated that despite withdrawing from Powerchip’s board of directors, the relationship between both companies remains strong and the working relationship has not changed.
• NEC Electronics's (NELTY.PK) semiconductor orders would increase several percent this quarter, helped by demand for chips used in cars and liquid-crystal displays. Orders in the quarter to probably jumped one and a half times from the previous three-month period, as manufacturers emerged from a period of excessive inventory cuts. He inherits a company facing its fifth consecutive year of losses as falling sales of chips used in mobile telephones, cars and flat-screen televisions outpace cost reductions. NEC Electronics in May said it planned to cut labor and research costs by 90 billion yen (US$972 million) this financial year to break even at operating level this fiscal year. The company was increasing production to meet a recovery in demand. The factory-utilization ratio, a measure of how close the plants are to operating at full capacity, would probably rise to 60 per cent this quarter, from about 50 per cent last quarter and 43 percent in the first quarter this year.

Alternative Energy

• China's Trina Solar (TSL) and Canada's Canadian Solar (CSIQ) are preparing to open liaison offices in Japan to launch their respective solar-cell modules on the market. The two companies are both integrated producers, manufacturing ingots, wafers, cells and modules. They supply a diversity of module types, including crystalline, polycrystalline and building-integrated photovoltaics. Having primarily developed their businesses in Europe, they now are targeting Japanese demand for further growth. Their liaison offices are to work out strategies to penetrate the Japanese market, where strong competitors are already building up their presences. Trina Solar posted sales of US$300 million in 2007, swelling the figure to US$800 million in 2008 by setting up offices in Barcelona in Spain, Munich in Germany, Seoul in South Korea, San Francisco in the U.S. and Shanghai in China. Its production center at Changzhou in China achieved an output capacity of 350 MW at the end of 2008 and is to be further expanded to about 550 MW by the end of this year.

Hardware

• Samsung Electronics Co. is entering Japan's market for digital signs. The company's local arm, Samsung Japan Corp., signed a sales agency contract with Nissho Electronics Corp. to market Samsung's digital signage products through the Nissho subsidiary NGC Corp. The first product will be the Samsung UD (Ultra High Definition Display), 46-inch LCDs that can be linked together to create huge screens. As many as 250 UD panels can be combined. Nine interconnected panels create a 138-inch display with 8 million pixels, or around quadruple the resolution of full high-definition. Samsung will also release high-intensity digital signs for outdoor applications. Japan's digital signage market is expanding, and Samsung has set a wide target that includes sales to airports and public facilities.
• Sony Corp. (SNE) Chief Executive Officer Howard Stringer spurned calls by Activision Blizzard Inc. (ATVI) to cut prices of the PlayStation 3 because the US$400 console is unprofitable. Activision CEO Bobby Kotick said last month the publisher of the “Guitar Hero” and “World of Warcraft” games may shift away from developing products for Sony’s PlayStation 3 toward cheaper machines by competitors of the company. The PS3 trails the Wii and the Xbox 360 in sales. The Wii sells for US$250 and the least expensive Xbox costs US$200. Sony cut the price for the PlayStation 3 in the U.S. in July 2007 and in Japan in October that year, when it introduced a new model. The game unit has been Sony’s biggest money-loser during the past three years, accumulating 415.3 billion yen (US$4.4 billion) of operating losses.
• Sony Corp. plans to launch a new Vaio laptop that will sell for around 60,000 yen (US$629) in Japan in August, making an entry into the fast-growing netbook market. Netbook PCs are smaller and cheaper than traditional notebook computers and optimised for simpler computing tasks such as Web browsing and email. Pioneered by Taiwan's Asustek in 2007, other global brands such as Acer Inc, Hewlett-Packard and Dell have pushed out their own lines since then. Sony, the last major PC maker to enter the netbook segment, hopes the new product's design and high-resolution display will help the consumer electronics giant establish a presence in the market. The new Sony machine, equipped with Microsoft Corp's Windows XP operating system and Intel Corp's Atom processor, will have an LCD display with a resolution of 1,366-by-768 pixels, compared with the 1,024-by-600-pixel displays that are widely used in other netbooks. Sony declined to unveil its sales target for the new netbook model, but the company aims to boost its overall Vaio PC sales to 6.2 million units in the year to March 2010 from 5.8 million units a year earlier.
• Sony CEO Howard Stringer said the company has no plans to buy out its partner Ericsson's (ERIC) stake in their handset joint venture (JV) Sony Ericsson. Howard Stringer told reporters that he wanted to make the partnership work, and had had no indication that Ericsson was planning on pulling out.
• Canon Inc. (CAJ) said it would cut about 700 jobs at its chip equipment operations, underscoring a bleak outlook for the sector as the global economic crisis hits demand and forces chip makers to curb capital spending. The company says most workers to be affected are in Japan and that the workers will be transferred to other sections within Canon. Steppers are multi-million dollar machines used to etch circuitry onto semiconductors and LCD panels. Canon spokesman Makoto Sugimoto declined to say how many staff it has in its chip stepper operations but the Nikkei business daily reported that the 700 jobs were roughly equivalent to 30 percent. Canon does not expect its optical products division, which offers microchip and LCD steppers, to turn profitable until 2012. The company expects the unit to post an operating loss of 27.4 billion yen (US$285 million) in 2009.

Korea

Information Technology

• South Korean exports of information technology (IT) products fell 11.6 per cent on-year in June as the global economic slump dampened overseas sales. Exports of semiconductors, mobile phones and other IT products reached US$10.17 billion last month, with imports dropping 17.1 per cent to US$5.35 billion for a surplus of US$4.82 billion. While June's outbound shipments fell off compared to the year before, total export volume has increased monthly over the past six months, indicating that the world economy may be making a gradual recovery. Exports in June surpassed the US$10 billion mark for the first time this year. The ministry, in charge of the country's industrial policies and trade promotion, added that while exports have contracted vis-a-vis 2008, negative growth has slowed in recent months. IT exports declined 39.2 per cent on-year in December but contracted 26.8 per cent in March and 17.1 per cent in May. Exports of mobile phones and semiconductors were down 7.4 per cent and 23.0 per cent respectively in June while overseas sales of liquid panel displays gained 4.0 per cent compared to the year before. China was the biggest importer of Korean-made IT products, buying US$4.14 billion worth, followed by the U.S. with US$1.40 billion and the EU with US$1.39 billion.

Hardware

• Cross LCD panel purchase between Samsung and LG, which has been long-held wish in display industry will eventually begin in September. For this, the Minister Lee, Yun-ho of the MKE and CEO of two companies will sign on MOU. Although the initial quantity isn't much, it holds special meaning in that the two firms will do cross purchase key products for the first time in the industry history after ups and downs. Recently relations between China and Taiwan have deepened, check against Korean display industry has also become stronger, so the cooperation will fresh stimulus in overall industry. Samsung Electronics (VD and LCD Division) and LGE and LGD will conduct cross purchase for panels for monitors from September. VD Division of Samsung Electronics agreed to get 17 inch wide LCD panel for monitors from LGD and DD Division of LGE will get 22 inch wide LCD panel for monitor from LCD Division of Samsung Electronics. Samsung and LG received prototype of LCD panel for monitor from each other and are doing final test. This is the first time for Samsung Electronics to apply IPS LCD panel of LGD to its monitors.
• Samsung Electronics is estimated to buy US$7.5 billion worth of components from Taiwan this year for its liquid-crystal display (LCD) TVs lighted up by light emitting diode (LED) backlights. Samsung has projected to ship two million units of the TVs by the end of this year, a volume estimated to command 10 percent of its total TV shipments throughout this year. The company has delivered 400,000 systems in three months following the new launch in April this year, snatching up 90 percent of the world market. Items on the company’s procurement list include LED chips, LED backlights, display panels, monitors and TVs. The estimated 2009 procurements represent a 7-10 percent increase in value from 2008. Although supplies of the display panels are reportedly running short, Samsung Taiwan’s executives stress LED backlight supplies are much tighter than LCD supplies since the uses of the backlights, which have been the light source in cell phones, in TVs have sharply increased. The Samsung officials noted that LED-type LCD TVs are noted for their slim design, energy conservation, and eco-friendliness. The company has introduced 2.99-centimeter-thick TVs.
• Samsung Electronics expected operating profit for 2Q to be 2.2-2.6 trillion won (US$1.7-2.0 billion), which will be the highest since 2Q of 2004 of 3.7 trillion won (US$2.9 billion). Market experts said this is the good sign getting out of recession and have issued positive outlook after 2Q. Samsung Electronics surprised market on that day. The estimates paled the major prospects by securities firms. If estimates become reality, the firm is going to turn around to go back before recession. The figure is conservatively 2.2 trillion won (US$1.7 billion). That is the highest since 2Q of 2004 and double average prospect by 26 securities firms of 962.8 billion won (US$747.6 million). The market attributed recovery of competition to good performance. In short, DS, slowed than cell phone and TV in 1Q, showed unexpectedly high performance. Semiconductor LCD sector that was deficit 980 billion in 1Q, turned around and TV and cell phone continued growth.

Media, Entertainment and Gaming

• The real-time IPTV service subscribers in Korea hit 468,773, a 10-time increase compared with the end of last December. Also, the total subscribers increased to 1,687,833 by 34,000 in just 6 months. That is bigger than the cancellation of the VoD IPTV subscription. On July 2, Korea's three IPTV operators said that KT's Qook TV has 724,564 subscribers while LG Dacom's My LGTV and SK Broadband's Broadband & TV have 188,289 and 774,980, respectively. Particularly, the number of subscribers to the real-time IPTV service has increased from 1,000 at the end of last year to 3.860 per day at the end of June, showing the strong development of the IPTV market within this year. Such a growth is likely to continue even in the second half. Noticeably, the statistics of June show that although subscribers of the VoD service have reduced dramatically, the overall IPTV subscription is growing thanks to the rapid growth of the real-time service subscribers.

Investments/ Ventures

• Japanese direct investment in South Korea surged 82.6 per cent in the first six months of the year to US$1.17 billion, or roughly 114 billion yen (US$1.2 billion), compared with the year-earlier period. Investment by manufacturers accounted for some 90 percent of this figure, mainly producers of parts and materials. AvanStrate Inc. is currently constructing a plant for glass substrates used in LCD televisions in the city of Pyeongtaek. Formerly known as NH Techno Glass Corp., the firm hopes to expand shipments to Samsung Electronics when the factory starts operations possibly by year-end. Although the firm has not disclosed the cost, it sought permission to invest 300 million dollars during the January-June period. Asahi Glass Co. also submitted an application to invest 35 million dollars to boost output of LCD glass substrates. Japanese investment in South Korea grew sharply since last October as the yen strengthened against the won. The U.S. and Europe cut investment because they were hit hard by the financial crisis. But Japanese materials producers saw opportunities to increase supplies to Samsung and other local companies that are competitive internationally. South Korea has been actively trying to attract the Japanese parts and materials sectors in order to shrink its trade deficit with Japan.
• The South Korean government plans to invest 155 billion won (US$122 million) into 26 commercial projects to boost up new growth industries by mid 2010. The government is designing the so-called short-term research and development funds to support companies in related areas. Under the recent plan, companies in eight main industrial areas, such as bio-pharmaceuticals, robotics, desalination plants, light emitting diodes, new semiconductors, displays, green cars and clean coal will be receiving the funds. The companies include large conglomerates such as Samsung Electronics Co., Hyundai Motor Co., SK Energy Co., LG Electronics and POSCO, as well as small-sized companies. Companies to get the funds are expected to invest 1.9 trillion won (US$1.5 billion), into facility investments by 2011.

Semiconductors

• Hynix Semiconductor Inc will reduce investment in a new production facility by 45 percent to 2.1 trillion won (US$1.64 billion) and extend the investment period by two years to 2011. The world's No.2 chipmaker said it would invest 24.6 percent of its capital between April 2007 and December 2011 to expand 12-inch wafer production capacity in Chungju, south of Seoul. Originally, it had planned to invest 3.8 trillion won or 44.5 percent of its capital between April 2007 and July 2009, in a board decision made in April 2007.

China

Internet

• Netease.com.Inc. (NTES) will pay an annual base payment of no more than US$60 million to Blizzard Entertainment, a leading computer games developer. The company would pay a minimum amount of fees regardless of the game's operations, as stated in the agreement signed by two sides. Aside from the share of revenue, Blizzard could also gain from providing technical support, though this amount would be out-scaled by the base payment.
• Shanda Literature, an online literature platform of Chinese online game operator Shanda Interactive Entertainment Ltd. (SNDA), is seeking new profit-making modes. The unit held a 3G mobile phone original novel exhibition in an attempt to collect excellent works. In future, it will launch mobile phone payment novel download services and share download charges and advertising revenues with authors. Shanda Literature will partner with China's top ten publishing houses. Mobile phone reading is likely to lead the reading market and draws attention of the investment industry. Shanda Literature started to optimize its wireless reading platform last year and reached strategic cooperation with China Mobile (CHL). Established in July 2008, Shanda Literature operates three online literary websites, including qidian.com, hongxiu.com, as well as jjwxc.net. By the first quarter of 2009, the daily peak visit volume of the three sites had reached nearly 400 million.

Software

• Kingsoft and Qihoo 360 have agreed to launch customized security services on each other's platforms. With the cooperation, Qihoo 360 will promote the Kingsoft Duba 360 customized edition to its 200 million users. Kingsoft Duba will then recommend the 360-Kingsoft customized security browser on its official website. The service fee of the customized Kingsoft Duba is 25 yuan (US$3.6) for six months and the two parties will share the income, but the profit-sharing ratio has not been released. The corporation between the two companies has gained wide attention from the Chinese online security industry because the competition in China's anti-virus software market is quite serious.

Mobile/Wireless

• China's mobile e-commerce revenues are expected to rise up to 130 percent from 2008. With the arrival of 3G era, China's three telecom operators, China Mobile, China Unicom (CHU) and China Telecom (CHA) and newcomers, such as Beijing UFIDA Mobile Business Technology Co., Ltd., have tasted the water in the field of mobile e-commerce one after another. However, since China's mobile e-commerce is still in the initial stage of development, credit lacking, incomplete payment system, unclear mode of business and other negative factors will somehow restrain the cultivation of the market.

Telecommunications

• China's telecom industry generated business volume of 214.12 billion yuan (US$31.3 billion) and operating revenues of 71.47 billion yuan (US$10.4 billion) in May. Statistics show that the industry's business volume in the first five months exceeded one trillion yuan (US$146.3 billion), up 11.3 percent on year and operating revenues climbed 2.1 percent on year. The nation's fixed-line business volume kept on dropping with the moderate growth in mobile communications business volume. Traffic volume of local fixed-lines in January-May decreased 11.8 percent from a year earlier to 232.59 billion times. The duration of traditional fixed long-distance calls and IP calls declined 4.6 percent and 16.8 percent, respectively, to 35.21 billion minutes and 50 billion minutes, and that of mobile phone calls rose 17.6 percent. The volume of text messages sent in the first five months hit 319.54 billion pieces, up 11.2 percent on year.
• China Mobile Ltd. reached a mobile Internet user base of 139 million in the first quarter of 2009, surging 38.12 percent quarter on quarter and 226.37 percent year on year. The company's mobile Internet active user base reached 94.59 million, making up 68.2 percent of the total in the Chinese market. China Unicom (Hong Kong) Ltd. had a GSM active user base of 36.64 million, accounting for 26.4 percent of the total; and China Telecom Corporation Ltd. hit a CDMA active user base of 7.56 million, taking 5.4 percent of the total. With the 3G network beginning commercialization in China, the nation's three biggest telecoms operators scramble for mobile Internet users, which will be the biggest beneficiary to enjoy low-price and increasingly various mobile Internet services.
• China now has a TD-SCDMA user base of more than 1.03 million, Su Jinsheng, director general of the Bureau of Telecommunication Administration under the Ministry of Industry and Information Technology of China said. China Mobile Ltd. is the only TD-SCDMA carrier in the nation's fledging 3G market. It is the biggest telecommunications carrier in both China and the world in terms of number of subscribers. Under the program made by the listed company's parent China Mobile Communications Corporation, the number of China Mobile's cell towers has been beyond 20,000; and it is scheduled to invest 58.8 billion yuan (US$8.6 billion) in its cell tower construction in 2009 and lets the number exceed 80,000, serving 238 cities across the country.
• China Unicom and the Shanghai Municipal Government signed a framework agreement on cooperation in the informatization field. The Unicom Group granted a three-year investment of 20 billion yuan and confirmed cooperation with local government in several areas. The telecom operator will increase the fixed-asset investment in Shanghai, enhance the city's informatized service ability, boost the economic growth, and turn the city into a key information and communication hub in the sia-Pacific region. The carrier earmarked 800 million yuan (US$117.1 million) for guaranteeing the communication during Shanghai World Expo in 2010, and would boost the employment in the municipality through promoting the development of each tache of the telecom industry chain, which may add about 10,000 jobs indirectly. Meanwhile, the Unicom Group would implement the broadband speed acceleration strategy in full swing, and boost the access network construction based on FTTB.
• China Mobile may buy a stake in Industrial and Commercial Bank of China, the world's largest bank by market value, as requested by China's state asset watchdog, the State-owned Asset Supervision and Administration Commission (SASAC). SASAC is encouraging state-owned enterprises to combine their industrial capital with financial capital. Its request is in line with its goal of propping up the shares of big state-owned banks, said the paper. However, talks are still in the preliminary stages, and the size of the stake SASAC is encouraging China Mobile to buy is not known. Officials from China Mobile said they were not aware of the request to buy into ICBC.
• China Telecom plans to purchase more than 3 million units of cellphones early July in cooperation with China's four agent dealer to launch a 3G handset procurement. Of the terminals the telecom operator plans to buy, the handsets at a price of over 1,000 yuan (US$146.3) per unit should support 3G, but there will be a small proportion of dual SIM card dual standby GSM mobile phones with prices above 2,000 yuan (US$292.6) per unit. For the CDMA handset market, market share of medium- and high-end cellphones with prices over 700 yuan per unit has showed an increasing trend to reach 22 percent in May with the sales volume amounting to 440,000 units.
• Datang Telecom Technology Co., Ltd. is in talks to sell a 20 percent stake, worth as much as 3 billion yuan (US$439 million), to China's national pension fund National Social Security Fund (NSSF). Datang Telecom, the major developer of China's TD-SCDMA standard for 3G telecoms services, and the fund have not yet finalized a price tag for the proposed private placement. The proceeds will be used to shore up Datang Telecom's production capacity and improve working capital. Last year, State Development and Investment Corp. (SDIC) bought a 35 percent stake in Datang Telecom Holdings for 5 billion yuan (US$731.7 million). The national pension fund and Datang have decided that the price range will be set between 2.5 billion yuan (US$365.8 million) and 3 billion yuan (US$439 million). The NSSF will take a 20 percent stake in Datang Telecom Holdings after buying new shares issued by the telecoms equipment firm.

Media, Entertainment and Gaming

• China's mobile game market size is expected to rise to 38.5 percent year on year. With the acceleration of China's 3G commercialized operation, mobile entertainment service will become a crucial driving force boosting the increase of mobile Internet businesses, and the mobile game, as one of the key parts of mobile entertainment services, is developing rapidly. Currently, improved environment of mobile Internet market and advanced handset terminal functions have placed a solid foundation for mobile game's development, and the service is expected to be a business aspect with high growth in the mobile Internet industry. China's mobile game market has entered into a growing period. 3G improves the operating environment of mobile game, the user base expands in great pace, and the number of newcomers soars. Industrial participators become increasingly conscious about the development trend of the mobile game market, and uncertain factors that may impact the industry chain lessen gradually. Contents of mobile game verify, game quality increases, and the mobile Internet game shows a booming trend.
• Noah Education Holdings Ltd. has acquired 100% of Little New Star Education Group for 113 million yuan (US$16.5 million) in cash and stock. Little New Star specializes in children's English language training and is expected to generate between 13 million yuan (US$1.9 million) and 15 million yuan (US$2.2 million) net profit in fiscal 2010. The parties already signed a definitive agreement for the acquisition.

Hardware

• Ericsson Telephone Co. has won deals totaling US$1.7 billion to deliver second- and third-generation mobile communication equipment to Chinese operators China Mobile Communications Corp. and China Unicom, indicating rapid growth on the country's telecom market. Mats Olsson, Ericsson's president for Greater China, said that the value of the deals is roughly equivalent to Ericsson's entire sales in the country during 2008. The framework contract with China Mobile, valued at US$1 billion, includes products and solutions to expand the company's networks in 18 Chinese provinces. Under the framework agreement with China Unicom, valued at US$700 million, Ericsson will upgrade the operator's GSM networks in 10 provinces and provide GSM/WCDMA networks and wireless access system in 15 provinces. Chinese operators were awarded 3G mobile phone business licenses from the authorities as recently as January. Western gear companies like Ericsson and Alctatel-Lucent have since then been fighting for market share in the country, aiming for a slice of its investment in improving the networks as growth on other markets slows.
• China's TV export value rose 32.8 percent and 6.9 percent month on month in March and April 2009, in spite of 17.1 percent and 22.6 percent year-on-year decreases. Chinese regulators lifted the tax rebate rate on CRT TV export to 17 percent, and the same drawback rate was imposed on TV transmission equipment export days ago. Partly thanks to these preferential polices, TCL Multimedia Technology Holdings Ltd. CEO Leong Yue Wing estimated TCL TV export value in 2009 to keep flat from last year. Tsinghua Tongfang Co., Ltd. is expected to sell 1.5 million TVs beyond China this year, rocketing 300 percent year on year. Xiamen Overseas Chinese Electronic Co., Ltd. saw export of 580,000 TVs, surging 65 percent from the comparable period of 2008. And the TV export of Skyworth Digital Holdings Ltd. hiked 69 percent year on year from April 2008 to February 2009.

Semiconductor

• MediaTek Inc. and Shenzhen Hesi Technology Co., Ltd. are expected to stir the Chinese Mainland's smartphone market with their new mobile phone chips. As a subsidiary of Huawei Technologies Co., Ltd., Hesi Tech lately launched its chips applicable to smartphones priced at 998 yuan (US$146) to 1,020 yuan (US$149.2). The prices of most smartphones in the mainland are higher than 10,000 yuan (US$1463), presently. In the fourth quarter of 2009, MediaTek Inc. will reportedly put up its first smartphone platform solution. And the move is expected to bring many knockoff manufacturers into the smartphone market, as 87 percent of the mainland's knockoff cellphones adopt MediaTek chips. Analysts estimated the world's smartphone semiconductor output value to jump 16 percent year on year in 2009, in spite of a deep decline in the whole semiconductor industry. As for the smartphone semiconductor output value in 2010, analysts predicted a 30 percent growth at least.

Alternative Energy

• Chinese government has set a new target of adding 20 GW of installed photovoltaics (PV) power generating capacity in the 10 years from 2010 to 2020, which means an increase of two GW for each year. China is likely to publish its new energy industry stimulus plan next month at the soonest. The plan raises the target for the installed capacity of the photovoltaics industry. China now has several solar PV enterprises listed in foreign stock markets. They include SunTech Power Holdings Co., Ltd. (STP), LDK Solar Co., Ltd. (LDK), Trina Solar Limited, Solarfun Power Holdings Co., Ltd. (SOLF) and China Technology Development Group Corporation, Yingli Green Energy (YGE), and JA Solar (JASO).
• Yingli Green Energy Holding has secured two credit facilities, the first worth US$100 million from Bank of Communications' Offshore Center, and the second worth 300 million yuan (US$43.9 million) from the Hebei Branch of Bank of Communications. The company also announced that its Baoding-based wholly owned subsidiary, Yingli Energy (China), made an early repayment of a US$50 million loan drawn in April this year from a fund managed by Asia Debt Management.
• Suntech Power Holdings said the company Chief Operating Officer Johnson Chiang has resigned from his post for personal reasons. Vice President of Manufacturing Technology and Quality Guangchun Zhang will oversee crystalline silicon PV manufacturing operations in China while Suntech searches for a replacement. Suntech Chairman and CEO Dr. Zhengrong Shi will take charge of the Shanghai thin film plant, KSL Kuttler and BIPV manufacturing operations at Suntech Japan. Guangchun Zhang joined Suntech as a VP in November 2005.

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.

Solar shares, which in recent weeks have staged a ferocious rally, are getting hammered Monday, as investors take profits amid concerns about pricing and demand in the sector. As I noted last week, even some of the smallest and most speculative solar names had taken off, making the sector look more than a little frothy. But with some smaller solar players running into trouble - Hoku on Friday said it might run out of cash before it can complete a planned polysilicon factory - the stocks today are losing ground.

In a research report late Friday, FBR Capital analyst Mehdi Hosseini said that product prices in the sector are falling more than expected. He says that while investors are anticipating “a hockey-stick shaped demand uptick in the U.S., China and other emerging countries,” he instead sees a slow roll-out of subsidies, tightened terms from financiers and over-hyped news items, some from untrustworthy sources.

At the end of each trading week, Hillbent scans the equity market for potential anomalies which exhibit extremely oversold and overbought conditions. Past observations have revealed that such candidates may experience reversal corrections to the upside or downside once the market reconfirms that their fundamentals remain solidly intact or relatively poor. From a contrarian perspective, these lists may also serve as a precursor to changes in institutional sentiment and underlying fundamentals.

(The purpose of this report is not to provide specific recommendations, but instead serve as a time-saving reference tool and starting point for investment ideas as the upcoming trading week unfolds. Of course, the results generated are not always perfect and users are strongly encouraged to perform their own due diligence on these names. Note that overbought and oversold conditions are based upon proprietary algorithms and quantitative models instead of conventional technical analysis indicators. As a supplement to this report, please refer to our Market Condition Summary to determine if market direction trends support a bullish or bearish investment bias over short-term, intermediate, and long-term timeframes.)