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Why Shares of Trina Solar Limited and JinkoSolar Co. Jumped Today

By Travis Hoium – Aug 25, 2015 at 12:15PM

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China's new banking policies are helping solar stocks today.

What: Shares of Chinese solar stocks are sharply higher today, led by JinkoSolar's (JKS -1.26%) 25% jump and Trina Solar (NYSE: TSL) rising 17%.

So what: This is partially a recovery of solar stocks, which have been hammered over the past week on fear that the Chinese economy is slowing down. But there's also fuel from the People's Bank of China, which lowered its benchmark interest rate a quarter percent overnight and reduces bank required reserve ratios.  

Now what: In theory, the moves will help increase lending in China, which could help solar manufacturers with both manufacturing expansion as well as funding solar projects. In reality, today's bounce is more speculation than a move based on the fundamental health of JinkoSolar and Trina Solar.

I think both companies have a tremendous opportunity to grow in the solar industry but investors should watch what the impact of China's economic weakness has on third quarter results. China is expected to be the largest market in the world this year and if low bank liquidity or a slow economy affect that it could be bad for Chinese solar stocks, despite today's pop.

Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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