Pinagina Business Solution

Archive for February, 2012

We hope that this has given you some insight to the market and, in turn, your investment strategies. Let’s recap what we’ve learned in this:

• Economics is best described as the study of humans behaving in response to having only limited resources to fulfill unlimited wants and needs.

• Scarcity refers to the limited resources in an economy. Macroeconomics is the study of the economy as a whole. Microeconomics analyzes the individual people and companies that make up the greater economy.

• The Production Possibility Frontier (PPF) allows us to determine how an economy can allocate its resources in order to achieve optimal output. Knowing this will lead countries to specialize and trade products amongst each other rather than each producing all the products it needs.

• Demand and supply refer to the relationship price has with the quantity consumers demand and the quantity supplied by producers. As price increases, quantity demanded decreases and quantity supplied increases.

• Elasticity tells us how much quantity demanded or supplied changes when there is a change in price. The more the quantity changes, the more elastic the good or service. Products whose quantity supplied or demanded does not change much with a change in price are considered inelastic.

• Utility is the amount of benefit a consumer receives from a given good or service. Economists use utility to determine how an individual can get the most satisfaction out of his or her available resources.

• Market economies are assumed to have many buyers and sellers, high competition and many substitutes. Monopolies characterize industries in which the supplier determines prices and high barriers prevent any competitors from entering the market. Oligopolies are industries with a few interdependent companies. Perfect competition represents an economy with many businesses competing with one another for consumer interest and profits.

Investing Ideas
Facebook is highlighting the value of social media products and challenging the valuations of tech companies. And if Facebook has no proper place in China, maybe China should be reconsidering the value of their own services.

It seems that investors have the same idea.

With that in mind we decided to create a screen on Chinese tech stocks for those that are experiencing significant levels of institutional buying.

Hedge funds seem to think these companies should be worth more. Do you agree?

1. Sina Corp. (Nasdaq: SINA): Provides online media and mobile value-added services (MVAS) in the People’s Republic of China. Net institutional purchases in the current quarter at 2.1M shares, which represents about 3.19% of the company’s float of 65.77M shares.

2. Sohu.com Inc. (Nasdaq: SOHU): Engages in the brand advertising, online gaming, sponsored search, and wireless businesses in China. Net institutional purchases in the current quarter at 1.6M shares, which represents about 5.37% of the company’s float of 29.82M shares.

3. Isoftstone Holdings Limited (NYSE: ISS): Provides various information technology (IT) services and solutions in the Greater China and internationally. Net institutional purchases in the current quarter at 10.8M shares, which represents about 32.69% of the company’s float of 33.04M shares.

4. AutoNavi Holdings Limited (Nasdaq: AMAP): Provides digital map content and navigation and location-based solutions in the People’s Republic of China (PRC). Net institutional purchases in the current quarter at 1.2M shares, which represents about 5.01% of the company’s float of 23.94M shares.

5. UTStarcom, Inc. (Nasdaq: UTSI): Designs and sells Internet protocol (IP)-based telecommunications infrastructure products to telecommunications service providers and operators worldwide. Net institutional purchases in the current quarter at 16.6M shares, which represents about 17.02% of the company’s float of 97.54M shares.

6. Bitauto Holdings Limited (Nasdaq: BITA): Provides Internet content and marketing services for the automotive industry in the People’s Republic of China. Net institutional purchases in the current quarter at 440.6K shares, which represents about 3.86% of the company’s float of 11.42M shares.

7. Hanwha SolarOne, Ltd. (Nasdaq: HSOL): Provides various energy solutions including silicon ingots, wafers, monocrystalline and polycrystalline solar cells, and solar modules. Net institutional purchases in the current quarter at 1.4M shares, which represents about 6.28% of the company’s float of 22.28M shares.

8. Tudou Holdings Limited ADR (Nasdaq: TUDO): Operates as an online video company in the People’s Republic of China. Net institutional purchases in the current quarter at 1.7M shares, which represents about 12.13% of the company’s float of 14.01M shares.

9. BCD Semiconductor Manufacturing Limited (Nasdaq: BCDS): Engages in the design, manufacture, and sale of power management analog integrated circuits (ICs) and other semiconductor devices in the People’s Republic of China. Net institutional purchases in the current quarter at 1.2M shares, which represents about 8.88% of the company’s float of 13.51M shares.

The highly anticipated Facebook IPO is highlighting the value of social media on a global scale. But no country is feeling the effect as strongly as China, whose social media companies like Sina Corp, Tencent Holdings Ltd. and RenRen Inc. have experienced a nice boost in value since headlines of the IPO circulated.

Market Watch reports that the IPO “indirectly draws attention to the potential of China and its 500 million Internet users,” and the regulations that block the company from entering. Facebook has said they are continuing to explore the possibility, and restrictions, of entering the Chinese market.

“We do not know if we will be able to find an approach to managing content and information that will be acceptable to us and to the Chinese government,” Facebook said.

But more importantly, would Facebook succeed in China? China’s approach to social media, which has already proved successful, is much different than Facebook. In China, micro blogs are more popular than the social platforms Google offers.

“J.P. Morgan analysts said that cultural preferences in mainland China place more emphasis on content than connectivity to other users,” reports Market Watch. “They said that in 2011, traditional social networks in China were overtaken by micro blogs in terms of subscriber growth and user activity.

This is not to mention that the China’s social media market is already well satisfied with homemade media products. Facebook, if allowed in the country, may face difficulties in gaining a foothold.

In order to get an online quote for commercial energy you will first need to visit the website of the energy provider from which you would like to know the rates. From there you will need to select the quote option and fill out the short form. Basic information about your business will be required. There is no need to worry, as the information requested will be safely transmitted and is not extremely personal in nature.

The rates that you are presented with will be current. Rates can change, so keep this in mind if you have received an online quote in the past. A fresh quote may be in order. There is no cost associated with the quote system, and you do not become obligated in any way to make a purchase just because you requested a quote.

What should you do with your quote for commercial energy? Ideally, you will want to compare it to the price you are currently paying for your electricity. If your business is new, you can choose to compare it to the rates of other energy providers. Quotes and decisions go together, with quotes providing the information that is needed in order to make a decision. Valuable information often comes at a cost. However, quotes are one form of valuable information that is completely free.

Utility is an abstract concept rather than a concrete, observable quantity. The units to which we assign an “amount” of utility, therefore, are arbitrary, representing a relative value. Total utility is the aggregate sum of satisfaction or benefit that an individual gains from consuming a given amount of goods or services in an economy. The amount of a person’s total utility corresponds to the person’s level of consumption. Usually, the more the person consumes, the larger his or her total utility will be. Marginal utility is the additional satisfaction, or amount of utility, gained from each extra unit of consumption.

Although total utility usually increases as more of a good is consumed, marginal utility usually decreases with each additional increase in the consumption of a good. This decrease demonstrates the law of diminishing marginal utility. Because there is a certain threshold of satisfaction, the consumer will no longer receive the same pleasure from consumption once that threshold is crossed. In other words, total utility will increase at a slower pace as an individual increases the quantity consumed.

Take, for example, a chocolate bar. Let’s say that after eating one chocolate bar your sweet tooth has been satisfied. Your marginal utility (and total utility) after eating one chocolate bar will be quite high. But if you eat more chocolate bars, the pleasure of each additional chocolate bar will be less than the pleasure you received from eating the one before – probably because you are starting to feel full or you have had too many sweets for one day.

This table shows that total utility will increase at a much slower rate as marginal utility diminishes with each additional bar. Notice how the first chocolate bar gives a total utility of 70 but the next three chocolate bars together increase total utility by only 18 additional units.

The law of diminishing marginal utility helps economists understand the law of demand and the negative sloping demand curve. The less of something you have, the more satisfaction you gain from each additional unit you consume; the marginal utility you gain from that product is therefore higher, giving you a higher willingness to pay more for it. Prices are lower at a higher quantity demanded because your additional satisfaction diminishes as you demand more.

In order to determine what a consumer’s utility and total utility are, economists turn to consumer demand theory, which studies consumer behavior and satisfaction. Economists assume the consumer is rational and will thus maximize his or her total utility by purchasing a combination of different products rather than more of one particular product. Thus, instead of spending all of your money on three chocolate bars, which has a total utility of 85, you should instead purchase the one chocolate bar, which has a utility of 70, and perhaps a glass of milk, which has a utility of 50. This combination will give you a maximized total utility of 120 but at the same cost as the three chocolate bars.

Income Elasticity of Demand
In the second factor outlined above, we saw that if price increases while income stays the same, demand will decrease. It follows, then, that if there is an increase in income, demand tends to increase as well. The degree to which an increase in income will cause an increase in demand is called income elasticity of demand, which can be expressed in the following equation:

If  greater than one, demand for the item is considered to have a high income elasticity. If however  is less than one, demand is considered to be income inelastic. Luxury items usually have higher income elasticity because when people have a higher income, they don’t have to forfeit as much to buy these luxury items. Let’s look at an example of a luxury good: air travel.

Bob has just received a $10,000 increase in his salary, giving him a total of $80,000 per annum. With this higher purchasing power, he decides that he can now afford air travel twice a year instead of his previous once a year. With the following equation we can calculate income demand elasticity:

Income elasticity of demand for Bob’s air travel is seven – highly elastic.

With some goods and services, we may actually notice a decrease in demand as income increases. These are considered goods and services of inferior quality that will be dropped by a consumer who receives a salary increase. An example may be the increase in the demand of DVDs as opposed to video cassettes, which are generally considered to be of lower quality. Products for which the demand decreases as income increases have an income elasticity of less than zero. Products that witness no change in demand despite a change in income usually have an income elasticity of zero – these goods and services are considered necessities.

Factors Affecting Demand Elasticity
There are three main factors that influence a demand’s price elasticity:

1. The availability of substitutes – This is probably the most important factor influencing the elasticity of a good or service. In general, the more substitutes, the more elastic the demand will be. For example, if the price of a cup of coffee went up by $0.25, consumers could replace their morning caffeine with a cup of tea. This means that coffee is an elastic good because a raise in price will cause a large decrease in demand as consumers start buying more tea instead of coffee.

However, if the price of caffeine were to go up as a whole, we would probably see little change in the consumption of coffee or tea because there are few substitutes for caffeine. Most people are not willing to give up their morning cup of caffeine no matter what the price. We would say, therefore, that caffeine is an inelastic product because of its lack of substitutes. Thus, while a product within an industry is elastic due to the availability of substitutes, the industry itself tends to be inelastic. Usually, unique goods such as diamonds are inelastic because they have few if any substitutes.

2. Amount of income available to spend on the good – This factor affecting demand elasticity refers to the total a person can spend on a particular good or service. Thus, if the price of a can of Coke goes up from $0.50 to $1 and income stays the same, the income that is available to spend on coke, which is $2, is now enough for only two rather than four cans of Coke. In other words, the consumer is forced to reduce his or her demand of Coke. Thus if there is an increase in price and no change in the amount of income available to spend on the good, there will be an elastic reaction in demand; demand will be sensitive to a change in price if there is no change in income.

3. Time – The third influential factor is time. If the price of cigarettes goes up $2 per pack, a smoker with very few available substitutes will most likely continue buying his or her daily cigarettes. This means that tobacco is inelastic because the change in price will not have a significant influence on the quantity demanded. However, if that smoker finds that he or she cannot afford to spend the extra $2 per day and begins to kick the habit over a period of time, the price elasticity of cigarettes for that consumer becomes elastic in the long run.