China announced on June 1 changes to the subsidies that has underpinned its rise to become the world's largest solar market in recent years.

IHS Markit, a market research firm, was preparing to lower its global solar installation forecast for this year by between 5 and 10 gigawatts, or up to 9 percent, analyst Camron Barati said. The impact in China, which accounts for half the global market, could be up to 17 GW, the firm said.

Another market research firm, Wood Mackenzie, said on Wednesday that China's capacity additions would likely be about 20 GW lower than it had expected.

An oversupply of cheap Chinese-made panels that had been destined for domestic projects will help boost demand for solar in other countries and sop up some of the demand lost in China, IHS said.

But a drop in prices will leave manufacturers with razor-thin margins as they seek to unload their products.

"There will be a stressful environment for pricing in the near term," Barati said. "Something like this certainly has global ripples."

In April, IHS Markit forecast 2018 global installations would hit a record 113 GW, with 53 GW coming from China alone. China is also the world's largest producer of solar panels.

But the Asian nation last week said it would not build any more solar power stations in 2018 and cut its feed-in tariff subsidy, which guarantees a certain price for power.

Solar investors reacted by selling off stocks. The MAC Global Solar index <.SUNIDX> is down 7 percent this week. Chinese panel makers Canadian Solar Inc , JinkoSolar Holding Co Ltd and Yingli Green Energy Holding Co Ltd have been hit, as well as U.S. panel makers SunPower Corp and First Solar Inc.

JMP Securities analyst Joe Osha slashed his rating on First Solar shares to "underperform" on Wednesday and cut his price target to $46 (£34.2) from $87.

The Trump administration's 30 percent tariffs on solar imports will help support prices in the United States, Osha said, but added that First Solar is seeking to do more business overseas and pricing everywhere could get very competitive.

"No business is insulated from market reality," he said.

(Reporting by Nichola Groom; Editing by Lisa Shumaker)

By Nichola Groom