Monday, August 17, 2009

Laws: Anti-dumping


Change in law policy can impact companies outlook severely. For example, there can be environmental standards requiring companies to buy better wastewater treatment or other equipments. This benefit companies that had already invested in them or have the cash flow for them. Also, the manufacturer of those equipments will win too. However, companies without enough cashflow to invest will have to cease operations or borrow heavily too.

One law policy I seen mostly is the anti-dumping law against certain China exports.

Countries who cannot compete with the cheaper China alternatives will try to use the law to protect their own exports. For example, while examining the Prospectus of Latitude Tree, I realize that Vietnam is benefiting from the anti-dumping law against China furniture exports. Steel, chemical and textile are also the more common sectors that China have been hit by anti-dumping law.

Investment tips:

Government policy can be underlooked when analyzing a company. When economic are bad, the biggest spenders are always the government. It is good to know more law policies that have impact on companies. Government policy can be a dual-edged sword, some will help a company, while others will hurt a company.

References:

  1. National Bureau of Economic Research - Anti-dumping statistics
  2. Wikipedia - Porter five forces analysis


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