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Strategies & Market Trends : Closed End Global and Country Funds
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To: peter michaelson who wrote (217)2/21/1998 6:30:00 PM
From: Allen Furlan  Read Replies (2) of 289
 
Re Korean arbitrage. Quite a dilema to separate effects of market action and mis-pricing(ie high premiums to Seoul market). I down loaded makox,kep,pkx,skm for one year. Here are some key data points.
Date Stock Price MAKOX Price Ratio
2/26/97 PKX 20.13 5.88 3.42
7/22/97 PKX 31.75 6.38 4.96
11/12/97 PKX 14.56 4.25 3.42
12/24/97 PKX 17.56 1.79 9.81
2/20/98 PKX 21.31 2.85 7.47

2/26/97 KEP 18.63 5.88 3.17
11/12/97 KEP 8.00 4.25 1.98
2/20/98 KEP 9.88 2.85 3.47

I dont know if any of these stocks had significant dividends during the period. But if you had known about the asian meltdown at the beginning of the year and had bought makox and sold ADRs you would have done well on kep and broken even on pkx by Nov 12. So being astute analysts we could have increased the position and had our heads handed to us on a plate as makox collapsed and the ADRs strengthened. WOW! I have to study the threads some more but as of now Im not so sure that just buying MAKOX is not the best strategy. If there is an arbitrage it probably is against pkx.
By the way where did you get the korean prices of the adr backed stocks? Is there a source of a data base with korean prices and won conversion factors?
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