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Non-Tech : Paired Trades and Hedging Strategies

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To: tom pope who wrote (2)	10/5/2004 5:01:54 PM
From: Sam Citron	Read Replies (1) of 136

Tom, When I read the words "rapidly growing Asian auto maker", I expected TM (Toyota Motors) instead of TTM, (Tata Motors). Good heavens, I didn't even know that TTM ADRs were trading, and I fancy myself as the Indiamaven! With TCS IPO this summer and now motors, it looks like the venerable Tata dynasty has finally decided to sell itself aggressively to investors, both domestic and foreign. I have nothing against Tata Motors and I think India's economic fundamentals are in for great improvement relative to US. But I would note three relatively minor caveats: (1) The ADRs may trade at a substantial premium to the BSE (Bombay stock exchange) price. There is no arbitrage mechanism to remedy this disparity unfortunately. (2) In a liberalising trade regime, a domestic manufacturer like Tata enjoys less of an advantage against powerful foreign competitors, like Toyota. (3) GM pays a substantial 4.7% dividend, which the short seller is responsible for (with no tax deduction, unfortunately, against dividends received on other securities) [FD: Long TM, probably my favorite foreign stock hedge] Sam

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