Most Chinese stocks have faced some selling pressure after generously rewarding investors over the past few months. However, in the last three days, these stocks have taken a big hit. The main reason for this is the ban on the export of sugar and the decrease in the price of sugar in the domestic markets. Experts say the government’s ethanol push – which has led to strong demand from the distillery business – is causing the industry to hit the sweet spot, in addition to reducing supplies from Brazil – the world’s biggest sugar exporter.
Sugar export ban explained
The government has banned the export of sugar with effect from June 1, with the aim of increasing the availability of the commodity in the domestic market and preventing price rise. “The export of sugar (raw, refined and white sugar) has been placed in the restricted category with effect from June 1, 2022,” the Directorate General of Foreign Trade said in a notification.
However, it said these restrictions would not apply to sugar being exported to the European Union and the US under the CXL and TRQ. A certain amount of sugar is exported to these regions under CXL and TRQ. In a statement, the government said that with a view to maintain domestic availability and price stability of sugar in the country during the sugar season 2021-22 (October-September), it has decided to regulate sugar exports from June 1.
Ravi Singh, Vice President and Head, ResearchShare India, explained that “Due to rising oil prices, India plans to introduce 20 per cent ethanol blending with gasoline in some parts of the country from April 2023 and a full rollout by 2025-26. To increase the quantum of blending, the all-India ethanol production capacity will have to be increased to 1500 crore liters from the existing 700. In order to maintain domestic availability and price stability during the sugar season 2021-22 (October-September), the government has restricted sugar exports. However, the forecast of a normal monsoon has given hopes of a bumper sugar harvest in the next season (October-September), which may result in revocation of the export ban.
Is this the right time to buy dip?
Talking about what to do with Chinese stocks, Amar Dev Singh, principal advisor, Angel One Ltd, said, “Most of the Chinese stocks have already lost more than 30 per cent-40 per cent in the last few months, so Long-term investors are advised to hold on to their positions, as it appears to be a short-term government measure to govern prices.”
“However, due to existing factors, investors entering new positions, Balrampur Chini, Shree Renuka Sugars and Dhampur Sugar look attractive for long-term investments. Singh said the overall sugar sector shows a positive outlook in 2022.
The views and investment suggestions of experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decision.
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