Why has China become so special off late? Why the entire world is looking at it now?
- Our emphasis on Chinese economy, in yesterday’s Asian market section saw many queries coming in from readers across the world asking us to explain our view point better about China. Yes, those who all have their thinking caps “ON” about China, you certainly have caught the pulse of the market. Suddenly entire world markets seem to believe, what is good for China … is good for the world.
If we were to quickly note few points for you all about China, it would be these.
Prime source of occupation: Around 3/4th of Chinese economy is driven by manufacturing sector, while the US & Europe are more service dependent. Good Example: If US & Europe thinks about manufacturing new cars, they outsource it to China because of cheap labor. Now a Chinese company gets money from US & UK & manufactures cars according to given specifications. Now this is called as manufacturing sector. Later once the finished product or car is ready, it gets shipped to client’s destination i.e. US or UK. Once these cars gets sold, there comes a need for providing after sales service. US & UK employs it’s own people, to satisfy all service oriented job requirement. This is what is called as service sector.
Advantage: Simple, now apply the “Old School” analytical thinking. It’s only when a product gets manufactured & assumes a finished product look, it can be traded in the market & accordingly a service can be provided to prospective customers. Now if you knew, how to manufacture the product… you know how much of control you have over the entire industry. Your client’s may change, your orders may come from a different country but you know how to get order completed at the best cost. It’s the technique, where all the tails end.
Above point is just one of the points that we have put across, reasoning why the world is now envying China. People, who wish have concrete understanding about more factors or have specific doubts in mind, keep us posted with your questions.
What are circuit breakers in stock markets? How do they function?
Understanding Circuit Breakers for NIFTY & SENSEX:
To curb excessive volatility, SEBI has prescribed a system of price bands. These price bands or circuit breakers bring about a co-ordinated trading halt in all equity & equity based derrivative markets nation-wide. The index-based market-wide circuit breaker system applies at 3 stages of the index movement, either way viz. at 10%, 15% and 20%. These circuit breakers when triggered bring about a coordinated trading halt in all equity and equity derivative markets nationwide. The market-wide circuit breakers are triggered by movement of either the BSE Sensex or the NSE S&P CNX Nifty, whichever is breached earlier. In case of a 10% movement of either of these indices, there would be a one-hour market halt if the movement takes place before 1:00 p.m. In case the movement takes place at or after 1:00 p.m. but before 2:30 p.m. there would be trading halt for ½ hour. In case movement takes place at or after 2:30 p.m. there will be no trading halt at the 10% level and market shall continue trading. In case if the market hits 10% before 1 p.m. then as explained there would be a one hour halt in trading and after resumption of trade in case if the market hits 15% in either index, then there shall be a two-hour halt. If the 15% trigger is reached on or after 1:00p.m. but before 2:00 p.m., there shall be a one-hour halt. If the 15% trigger is reached on or after 2:00 p.m. the trading shall halt for the remaining part of the day. As explained if the market fails to resume at 10% then the next limit is placed at 15% and finally at 20%. In case if market fails to resume from 15% and if it hits 20% irrespective of the time, the trading shall be halt for remaining part of the day.
Circuit Breakers for Individual Stocks:
As an additional measure of safety, Individual scrip wise price bands of 20% either way [up/down] have been imposed for all securities except for those available for stock options. Both NSE and BSE have implemented the circuit limit system on the stocks. They have applied the stock wise circuit limit system at four levels i.e. 2%, 5%, 10% and 20%. Circuit limits like any other concept have both pros and cons. On the positive side, with the presence of circuit filters, the traders/investors’ fear of erosion of wealth is not rapid when compared to not having circuit limits. However, it may not be true with in all the cases. Many times, the stock might see a rise due to announcement of any corporate action. In that case, the rise of stock beyond a limit might be genuine but still, due to application of this limit the trading in stock is held. The need for circuit-filters can be questioned on several grounds. For instance, empirical evidence on the effectiveness of price limits, circuit-breakers and trading halts is ambiguous. But in the case of specific situations where it is clear that the equilibrium value of the asset will change, then it makes no sense to have circuit breakers.
What does treasury stocks mean?
There were a wide set of questions posted by our readers, with most wanting to know about “treasury stocks” after the recent RIL-RPL merger. Treasury stocks are just like any other shares issued by a company & later they themselves buy them back at a certain discussed price. But once a company buys a certain quantity of shares & calls them a treasury stocks they are not supposed to be offered for sale amongst the investors. But the shares will still remain active & carries the same market price equal to other stocks held by the same company and may be resold by the corporation at some future date.
One important point to note is, these types of shares are not entitled to be accounted either in case of dividend payments or earnings per share calculations. The holder of these shares shall not carry any voting privileges either. But in the event that the corporation chooses to offer the shares for sale, the stock would regain both voting rights and be subject to the issuance of dividend payments to the shareholder. Usually these kind of transfer of treasury stocks happens mostly amongst multiple companies held by the same group. In simpler terms, treasury stocks is just like keeping your money in treasury box anticipating a need for money that may arise in future.
What are benefit’s resulting from RIL-RPL merger, that happened today? Can you indicate the benefits, both from the company’s point of view & for investors too?
Speaking from RIL company’s point of view, we are not expecting any major changes resulting from the amalgamation between RIL-RPL. Please note that, RIL till date acted as a parent company for it’s subsidiary RPL & comes under the purview of Mr.Mukesh Ambani Group’s holding. This being the case, the respective managements of both the companies have got higher level of access to each other’s insider information & has more control over “prevailing conditions” pre-merger & “expected conditions” post-merger.
1> There certainly are brighter prospects in terms of global branding for Reliance Industries [RIL]as a company. Now with this merger, RIL will go on to become world's largest refining capacity at any single location & 13th largest while measuring in terms of refinery capacities. 2> Books of RPL denotes that it has got nearly 1.5 bn to 2 bn cash inflow & thus a merger increases the liquid cash portfolio of RIL, which in turn provides a chance to indulge in more fresh buyouts of more profitable businesses. 3> Off course yes, this merger will also lead to a betterment of EPS sentiment of RIL taking it past 120 rs which is good. Also the equity base of RIL will go up by Rs 1640 crore.
Actually there is nothing that can be specially told from investor’s point of view, as a growth of any invested company will ultimately benefit it’s investor’s too. So instead, it would be wiser if an investor starts to think how profitable is RIL as “a refinery” company now & project it’s future trend too. Well, speaking about present global refinery profit margins the sentiment isn’t that good at all. Indeed, off late we are seeing more refinery companies opting for other modes of profitable ventures than just refining due to decline in profits.
Could you please let us know how do they calculate GDP for a country?
GDP i.e Gross Domestic Product, is commonly used as an indicator of the economic health of a country, as well as to gauge a country's standard of living. GDP is usually calculated on an Annual Basis in every country. GDP is a measure of all the goods and services produced domestically.
GDP = C + G + I + NX Where: "C" is equal to all private consumption, or consumer spending, in a nation's economy "G" is the sum of government spending. // This is what we call Mystery. Very few have understood this until now :) "I" is the sum of all the country's businesses spending on capital // Investments made by Industries for our country’s growth, not their’s J. "NX" is the nation's total net exports, calculated as total exports minus total imports. (NX = Exports - Imports). NX is sometimes even denoted by just “E’. // Mind you, if Exports exceeds imports, it adds to the GDP. If not, it subtracts from the GDP.
All queries could be directed to Analyst@theclubsharewala.com. Topic on US economy is wide opened for everybody to comment up on. Please write to us, if you had a different view on this or if you felt that this issue has another phase which is never seen. 
- Our emphasis on Chinese economy, in yesterday’s Asian market section saw many queries coming in from readers across the world asking us to explain our view point better about China. Yes, those who all have their thinking caps “ON” about China, you certainly have caught the pulse of the market. Suddenly entire world markets seem to believe, what is good for China … is good for the world.
If we were to quickly note few points for you all about China, it would be these.
Prime source of occupation: Around 3/4th of Chinese economy is driven by manufacturing sector, while the US & Europe are more service dependent. Good Example: If US & Europe thinks about manufacturing new cars, they outsource it to China because of cheap labor. Now a Chinese company gets money from US & UK & manufactures cars according to given specifications. Now this is called as manufacturing sector. Later once the finished product or car is ready, it gets shipped to client’s destination i.e. US or UK. Once these cars gets sold, there comes a need for providing after sales service. US & UK employs it’s own people, to satisfy all service oriented job requirement. This is what is called as service sector.
Advantage: Simple, now apply the “Old School” analytical thinking. It’s only when a product gets manufactured & assumes a finished product look, it can be traded in the market & accordingly a service can be provided to prospective customers. Now if you knew, how to manufacture the product… you know how much of control you have over the entire industry. Your client’s may change, your orders may come from a different country but you know how to get order completed at the best cost. It’s the technique, where all the tails end.
Above point is just one of the points that we have put across, reasoning why the world is now envying China. People, who wish have concrete understanding about more factors or have specific doubts in mind, keep us posted with your questions.
What are circuit breakers in stock markets? How do they function?
Understanding Circuit Breakers for NIFTY & SENSEX:
To curb excessive volatility, SEBI has prescribed a system of price bands. These price bands or circuit breakers bring about a co-ordinated trading halt in all equity & equity based derrivative markets nation-wide. The index-based market-wide circuit breaker system applies at 3 stages of the index movement, either way viz. at 10%, 15% and 20%. These circuit breakers when triggered bring about a coordinated trading halt in all equity and equity derivative markets nationwide. The market-wide circuit breakers are triggered by movement of either the BSE Sensex or the NSE S&P CNX Nifty, whichever is breached earlier. In case of a 10% movement of either of these indices, there would be a one-hour market halt if the movement takes place before 1:00 p.m. In case the movement takes place at or after 1:00 p.m. but before 2:30 p.m. there would be trading halt for ½ hour. In case movement takes place at or after 2:30 p.m. there will be no trading halt at the 10% level and market shall continue trading. In case if the market hits 10% before 1 p.m. then as explained there would be a one hour halt in trading and after resumption of trade in case if the market hits 15% in either index, then there shall be a two-hour halt. If the 15% trigger is reached on or after 1:00p.m. but before 2:00 p.m., there shall be a one-hour halt. If the 15% trigger is reached on or after 2:00 p.m. the trading shall halt for the remaining part of the day. As explained if the market fails to resume at 10% then the next limit is placed at 15% and finally at 20%. In case if market fails to resume from 15% and if it hits 20% irrespective of the time, the trading shall be halt for remaining part of the day.
Circuit Breakers for Individual Stocks:
As an additional measure of safety, Individual scrip wise price bands of 20% either way [up/down] have been imposed for all securities except for those available for stock options. Both NSE and BSE have implemented the circuit limit system on the stocks. They have applied the stock wise circuit limit system at four levels i.e. 2%, 5%, 10% and 20%. Circuit limits like any other concept have both pros and cons. On the positive side, with the presence of circuit filters, the traders/investors’ fear of erosion of wealth is not rapid when compared to not having circuit limits. However, it may not be true with in all the cases. Many times, the stock might see a rise due to announcement of any corporate action. In that case, the rise of stock beyond a limit might be genuine but still, due to application of this limit the trading in stock is held. The need for circuit-filters can be questioned on several grounds. For instance, empirical evidence on the effectiveness of price limits, circuit-breakers and trading halts is ambiguous. But in the case of specific situations where it is clear that the equilibrium value of the asset will change, then it makes no sense to have circuit breakers.
What does treasury stocks mean?
There were a wide set of questions posted by our readers, with most wanting to know about “treasury stocks” after the recent RIL-RPL merger. Treasury stocks are just like any other shares issued by a company & later they themselves buy them back at a certain discussed price. But once a company buys a certain quantity of shares & calls them a treasury stocks they are not supposed to be offered for sale amongst the investors. But the shares will still remain active & carries the same market price equal to other stocks held by the same company and may be resold by the corporation at some future date.
One important point to note is, these types of shares are not entitled to be accounted either in case of dividend payments or earnings per share calculations. The holder of these shares shall not carry any voting privileges either. But in the event that the corporation chooses to offer the shares for sale, the stock would regain both voting rights and be subject to the issuance of dividend payments to the shareholder. Usually these kind of transfer of treasury stocks happens mostly amongst multiple companies held by the same group. In simpler terms, treasury stocks is just like keeping your money in treasury box anticipating a need for money that may arise in future.
What are benefit’s resulting from RIL-RPL merger, that happened today? Can you indicate the benefits, both from the company’s point of view & for investors too?
Speaking from RIL company’s point of view, we are not expecting any major changes resulting from the amalgamation between RIL-RPL. Please note that, RIL till date acted as a parent company for it’s subsidiary RPL & comes under the purview of Mr.Mukesh Ambani Group’s holding. This being the case, the respective managements of both the companies have got higher level of access to each other’s insider information & has more control over “prevailing conditions” pre-merger & “expected conditions” post-merger.
1> There certainly are brighter prospects in terms of global branding for Reliance Industries [RIL]as a company. Now with this merger, RIL will go on to become world's largest refining capacity at any single location & 13th largest while measuring in terms of refinery capacities. 2> Books of RPL denotes that it has got nearly 1.5 bn to 2 bn cash inflow & thus a merger increases the liquid cash portfolio of RIL, which in turn provides a chance to indulge in more fresh buyouts of more profitable businesses. 3> Off course yes, this merger will also lead to a betterment of EPS sentiment of RIL taking it past 120 rs which is good. Also the equity base of RIL will go up by Rs 1640 crore.
Actually there is nothing that can be specially told from investor’s point of view, as a growth of any invested company will ultimately benefit it’s investor’s too. So instead, it would be wiser if an investor starts to think how profitable is RIL as “a refinery” company now & project it’s future trend too. Well, speaking about present global refinery profit margins the sentiment isn’t that good at all. Indeed, off late we are seeing more refinery companies opting for other modes of profitable ventures than just refining due to decline in profits.
Could you please let us know how do they calculate GDP for a country?
GDP i.e Gross Domestic Product, is commonly used as an indicator of the economic health of a country, as well as to gauge a country's standard of living. GDP is usually calculated on an Annual Basis in every country. GDP is a measure of all the goods and services produced domestically.
GDP = C + G + I + NX Where: "C" is equal to all private consumption, or consumer spending, in a nation's economy "G" is the sum of government spending. // This is what we call Mystery. Very few have understood this until now :) "I" is the sum of all the country's businesses spending on capital // Investments made by Industries for our country’s growth, not their’s J. "NX" is the nation's total net exports, calculated as total exports minus total imports. (NX = Exports - Imports). NX is sometimes even denoted by just “E’. // Mind you, if Exports exceeds imports, it adds to the GDP. If not, it subtracts from the GDP.
All queries could be directed to Analyst@theclubsharewala.com. Topic on US economy is wide opened for everybody to comment up on. Please write to us, if you had a different view on this or if you felt that this issue has another phase which is never seen.
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