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To: Oblomov who wrote (168307)5/26/2002 2:46:14 PM
From: stevenallen  Respond to of 436258
 
I like the arbitrage idea here but haven't been following this closely enough. Both EWJ and JOF having been getting some major volume lately - money is clearly headed in that direction. Will do some more research but I'm definitely liking EWJ long - also looking at MC which has lagged a very strong SNE.



To: Oblomov who wrote (168307)5/26/2002 6:28:46 PM
From: Michael Bakunin  Read Replies (2) | Respond to of 436258
 
I'm not saying it wouldn't work, but JOF/EWJ is not an arbitrage. When JEQ went to a premium, I swapped it for EWJ, since they are approximate proxies for one another -- not so JOF.

Looking at the premiums available at cefa.com I'd say your best current bet is SNF/EWP. There are fatter premiums on the high yield funds, but those are a pain to hedge; ditto for JOF, I think. Then there's SNF.

The Spain Fund's holdings are relatively comparable to the index fund's, and it's trading at a 27% premium. On the downside, there's the drawback of paying out a 'managed distribution' of 2.5% quarterly. The next one's due in early July. Each $1 capital you're returning you shorted for $1.25, so even that might not be too painful.

The market currently is spitting money at anything that looks high yield (premiums on HY CEFs) or foreign income (vanishing discounts there), but it appears to have made a more-than-usually transparent blunder here. Piling into SNF this past month (watch the action at quote.yahoo.com makes little or no sense to me.

-mb

FD - I recently put on this exact trade, which may well be a sign to stay away.. -g-



To: Oblomov who wrote (168307)5/27/2002 10:00:58 AM
From: Knighty Tin  Respond to of 436258
 
Obl, Not too much. They don't really correlate that well. Look at the CEF discounts. JOF is at a huge premium while JEQ has half that premium. And JEQ is up 6.4% for the past year while JOF is up more than 33%. JEQ correlates closely to the EWJ. As does MLEA, which has been kicking butt. But nothing correlates to JOF other than, possibly, Fidelity's small cap Japan Fund. And borrowing the shares would be a killer.


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