China’s new trade policy, effective from January 1, hiking export taxes between five and 15 per cent, including steel, is likely to push prices up in developed countries.
The policy guidelines have also banned 589 tolling business (importing raw materials and exporting finished products duty-free) in commodities.
Mr Vishal Chandak, senior analyst, Emkay Share and Stock Brokers Ltd, said it would make Chinese products less competitive in the global market and increase steel prices in the developed economies.
The increase in the export tax is likely to benefit domestic players as pricing for steel and other raw materials is done on the landed import price parity basis, he said, adding that in case the exports did not decline, China was likely to increase the tariffs further.
China has taken many measures to reduce export of steel and other products to manage its burgeoning trade surplus with the US. It started with a 10 per cent export tax on semi- finished steel products such as billets and slabs in November 2006.
With exports showing no signs of slowing down, China reduced export duty rebate on various products, increasing export taxes and non-monetary measures such as licensing of steel exports between April 2007 and June 2007. This saw an immediate rise in exports to beat the deadline for implementing the measures. However, with the measures coming into effect the exports started declining.
The new tariff of export taxes, include an increase of five per cent on large steel sections from 10 per cent to 15 per cent as also on bar, rebar and wire rod from 10 per cent to 15 per cent.
The tax on medium heavy wide steel band and HR thin band is up to 10 per cent from five.
The tax on HR narrow band, narrow CR band plated sheet/band, colour coated sheet/strip and welded pipe and common cold-bent sections have been hiked to 15 per cent from five per cent. The levy on ingot and other alloy steel billet/slab has been raised to 25 per cent from 15 per cent.
Understanding Short Term Trading
Before I begin, this blog is not for intraday traders. My definition of short term implies duration of around 2 to 3 months.
Short Term stock picking is no rocket science, but rather a visual interpretation of technical charts. A basic moving average on a time frame chart will show the direction of the securities movement.
Moving averages is a mathematical results calculated by averaging a number of past data points. Moving averages (MA) in it's basic form is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. Once the value of MA has been calculated, they are plotted onto a chart and then connected to create a moving average line. Typical moving averages used for short term trading are 50 MA and 100 MA.
Types of Moving Averages
1) Simple Moving Average (SMA)
SMA is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. The usefulness of the SMA is limited because each point in the data series is weighted the same, regardless of where it occurs in the sequence. Critics argue that the most recent data is more significant than the older data and should have a greater influence on the final result.
2) Exponential Moving Average (EMA)
EMA overcomes the limits of SMA, where more weight is given to the recent prices in an attempt to make it more responsive to new information. When calculating the first point of the EMA, we may notice that there is no value available to use as the previous EMA. This small problem can be solved by starting the calculation with a simple moving average and continuing on with calculating the EMA.
The primary functions of a moving average is to identify trends and reversals, measure the strength of an asset's momentum and determine potential areas where an asset will find support or resistance. Moving averages are lagging indicator, which means they do not predict new trend, but confirm trends once they have been established.
A stock is deemed to be in an uptrend when the price is above a moving average and the average is sloping upward. Conversely, a trader will use a price below a downward sloping average to confirm a downtrend. Many traders will only consider holding a long position in an asset when the price is trading above a moving average.
In general, short-term momentum can be gauged by looking at moving averages that focus on time periods of 50 days or less. Looking at moving averages that are created with a period of 50 to 100 days is generally regarded as a good measure of medium-term momentum. Finally, any moving average that uses 100 days or more in the calculation can be used as a measure of long-term momentum.
Support, resistence and stoploss can be infered by referring the closet MA below or above the market price. The other factor that is used in short term momentum is the trading volume. The moving averages along with the trading volume can provide a better insight to short term movement.
Markets are moved by their largest participants - I believe this is the single most important principle in short-term trading. Accordingly, I track the presence of large traders by determining how much volume is in the market and how that compares to average. Because volume correlates very highly with volatility, the market's relative volume helps you determine the amount of movement likely at any given time frame--and it helps you handicap the odds of trending vs. remaining slow and range bound.
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