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By Belinda Cao - Tue Mar 27 23:03:15 GMT 2012

Solar stocks led a decline in Chinese shares traded in New York on speculation that Italy will follow Germany in cutting subsidies to the industry, dimming the outlook for global installations.

LDK Solar Co. tumbled the most in four days while Trina Solar Ltd. (TSL) dropped to a two-week low. The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. lost 0.3 percent to 105.42 yesterday, falling for the first time in three days. China Petroleum & Chemical Corp., Asias largest refiner, traded at its biggest discount to Hong Kong shares in three months.

Italy, the worlds second-largest solar market, is proposing to cut its industry subsidy by 50 percent, Citigroup Inc. technology analyst Timothy Arcuri said in a research note e-mailed yesterday, citing a first draft of the European nations fifth energy plan that the bank had obtained. Germany, the biggest solar market, will reduce aid to the industry by as much as 29 percent from April 1.

Solar stocks trading reacted to the news on the subsidy cut in Italy where solar sales normally offer manufacturers higher margins, Chris Kettenmann, an analyst at Miller Tabak & Co LLC in New York said by phone yesterday. The reductions in subsidies in Germany and Italy would be absorbed by cost cutting at Chinese solar makers.

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., retreated 0.2 percent to $37.25, after climbing the most in two weeks on March 26.

LDK, a solar wafer producer based in Xinyu in Jiangxi province, slid 5.4 percent to $4.24, the biggest daily drop since March 21. Trina, Chinas fifth-largest solar-panel supplier based in Changzhou in the eastern Jiangsu province, lost 2.7 percent to $7.44, the lowest level since March 12. Suntech Power Holdings Co., the worlds largest solar-panel maker, sank 1.6 percent to a two-week low of $3.05.

The cost of photovoltaic subsidies in Italy is higher than Citigroup had estimated, Arcuri said, citing the Italian energy document. The plan indicates a significant slowdown in the market, and the ongoing ad-hoc nature of cuts in Germany and Italy means financing for big projects in Europe will remain challenging, analysts led by Arcuri wrote in the report.

American depositary receipts of China Petroleum & Chemical Corp. (SNP), known as Sinopec, retreated 0.9 percent in its first decline in three days, to $112.40 as oil futures rose for a third day on the New York Mercantile Exchange. The ADRs, each representing 100 common shares in Sinopec, traded 1.3 percent below its Hong Kong stock, the biggest discount since Dec. 19.

The company, Asias largest refiner, added 0.8 percent to HK$8.84 in Hong Kong, or $1.14 per share, while shares climbed 0.1 percent to 7.45 yuan in Shanghai trading, the equivalent of $1.18.

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Web Stocks Rise on Consumption Boost Prospects: China Overnight