Daqo New Energy (DQ) stock surged 5.78% in pre-market trading on Tuesday, riding a wave of optimism in the Chinese solar sector. The rally comes amid rumors of potential production cuts in the polysilicon industry, a key material for solar cell manufacturing.

According to a report from China's state-run Securities Times, there are market rumors that a top polysilicon producer has proposed production cuts to support prices. Additionally, speculation suggests that China's top six polysilicon producers might acquire all remaining production capacity and set a target price range for the material. These rumors have sparked a broader rally in Chinese solar stocks, with Daqo New Energy, a major polysilicon producer, being a significant beneficiary.

The potential production cuts and price stabilization measures come at a crucial time for the industry, which has been grappling with overcapacity and plummeting prices. Daqo New Energy reported a loss of $71.84 million in the first quarter, highlighting the challenges faced by polysilicon producers. If the rumored measures materialize, they could provide much-needed support for companies like Daqo New Energy, potentially improving their financial outlook and driving further investor interest in the sector.