Solar Losers: Solarfun Power - TheStreet

QIDONG, China (

TheStreet

) - There was not much power in shares of

Solarfun Power

(SOLF)

on Wednesday, and it was far from a fun day for the Chinese solar player.

In the unwelcomed competition for daily solar sector dog that has been running since Germany began speaking about its proposed solar feed-in tariff cuts last week, Wednesday was the first day on which Solarfun finished on top of the solar loser heap.

Solarfun was down just short of 8% on Wednesday, while trading 1.5 million shares above its three million share daily average volume. The near-8% drop in Solarfun was a full 2% bigger in terms of daily solar declines than the second-worst performer on Wednesday,

JA Solar

(JASO)

.

Why did Solarfun suddenly become the market's biggest dog in relation to the political battle playing out in Germany?

For one, Solarfun ran up from a price of $7.63 to start the first trading day of 2010, to a share price of $10.42 by Jan. 11. By the end of last week, it was clear that Germany planned on a drastic cut in its solar feed-in tariffs. With Wednesday's drop back to $7.95, Solarfun has more or less corrected after its early 2010 run-up, and corrected in relation to the news out of Germany.

On Wednesday,

German politicians made their first official comments on proposed cuts in solar industry incentives.

Solarfun also has key relationships with a few major German solar players. As German solar shares sold off -- particularly in the European afternoon on Wednesday -- those Solarfun relationships may have received increase notice from investors. With German solar companies likely to take another hit tomorrow, Solarfun may still experience repercussions from the ongoing political battle in Germany.

Solarfun has deals in place with German solar company

Q-Cells

, for one. Burt Chao, an analyst with energy specialist Simmons & Company, said the Q-Cells relationship represents less than 20% of Solarfun's capacity. Solarfun also has an older relationship than its deal with Q-Cells with

Schuco

, a private German solar company.

The Simmons analyst said that in the near term, Solarfun will feel pain related to the German market. That's to be the case for just about every solar company.

However, Chao thinks Solarfun was correcting more due to the recent run-up than on the basis of the fact that it is exposed to the German solar risks to a greater degree than other solar companies.

Investors should expect big solar players like

First Solar

(FSLR) - Get Report

to also experience the pain of Germany's feed-in tariff reduction, as well as the Chinese solar leaders that have been correcting to a greater extent than Solarfun over the past several days, like

Trina Solar

(TSL)

and

JA Solar

(JASO)

.

"The margin compression in Germany will impact Solarfun like all solar companies, and the near-term outlook is not good, even though I still believe in Solarfun's long-term strategy," Chao said.

-- Reported by Eric Rosenbaum in New York.

RELATED STORIES:

>>Germany Announces Proposed Solar Cuts

>>First Solar: the German Tariff Fallout

>>Solar Losers: JA Solar Slips on Downgrade

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