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Allan Gray arbitrage | 8 Aug 2011 |
8 Aug 2011. This is a method I'm considering using to arbitrage profit out of Allan Gray unit trust prices. Eighteen percent of Allan Gray Orbis Equity is invested in Japan. The Japanese market closes at 08:00 South African time (15:00 their time, or 06:00 GMT), and you have until 14:00 to decide whether you want to switch at the 16:00 price. I imagine that the 16:00 price for japan is the same as the 08:00, changes will only be reflected tomorrow (even though events have occurred which may affect the price already).
Check how DBXJP has moved since the open in South Africa http://www.sharenet.co.za/v3/quickshare.php?scode=DBXJP and http://www.dbxtrackers.co.za/EN/showpage.asp?pageid=97&inwpnr=124&inrnr=98&pkpnr=308
Check how CS has done http://www.londonstockexchange.com/exchange/prices-and-markets/ETFs/company-summary.html?fourWayKey=IE00B52MJD48IEGBXETFS
Problem with the above ETFs is liquidity.
Check Rand/Yen at 06:00 GMT and 11:30 GMT. If a Rand is typically equal to 10 Yen. If the Rand is now equal to 9 Yen, then the Rand has weakend, the Yen has strengthened, and the value of the Japanese stocks in Rands have gone up. If the Rand is now equal to 11 Yen, then the Rand has strengthened, the Yen has weakened, and the value of the Japanese stocks in Rands have gone down. The calculation = - ((Rand/Yen @ 1130) / (Rand/Yen @ 0600) - 1) is the return of the Japanese stocks as a result of currency movements, since their exchange closed. If there is a large positive return, then invest, if there is a large negative return, then disinvest.
Check out Eurostoxx 50 has done (opens at 10am): http://www.bloomberg.com/apps/quote?ticker=SX5E:IND
Check out SWIX: http://www.bloomberg.com/apps/quote?ticker=JALSH:IND
If DBXJP has gone up that means that Japanese markets will probably open up tomorrow, so buy Allan Gray Orbis Global Equity.
If DBXJP has gone down that means that Japanese markets will probably open down tomorrow, so sell Allan Gray Orbis Global Equity.
Switch between SA cash and Orbis Equity.
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