Popular Arbitrage Trade Backfires as TSMC Frenzy Grows in US
- ADRs have surged more than the Taiwanese stock this year
- Their premium this quarter is at the highest average since ‘09
The long-favored arbitrage strategy of buying Taiwan Semiconductor Manufacturing Co.’s Taipei shares while shorting its US listing is starting to become painful.
The enthusiasm over artificial intelligence in the US has pushed TSMC’s American depositary receipts to their most expensive price versus the Taiwan stock since 2009 this quarter, data compiled by Bloomberg show. As of Friday, they traded at a premium of around 21%, compared with less than 8% for the five-year average. It reached a high of 30% during the Lunar New Year in February, when the Taiwanese stock market was closed.
