Old Mutual closed at 322.32 cents on the ZSE on Monday, while trading at 245.77 cents and 245.86 cents on the LSE and JSE, respectively, during the day.
This discrepancy of a cross listed share gives room for the simultaneous buying and selling of the shares, in different markets in order to take advantage of differing prices for the same share. For instance on Friday one would buy the Old Mutual share from the LSE and sell it 32.82 percent higher on the ZSE and likewise one would buy it on the JSE and sell it 30.35 percent higher at the ZSE, hence the arbitrage opportunity.
In the past 3 months, Old Mutual (ZSE) started to trade above other Old Mutual shares listed on the LSE and JSE starting from 14 September (according to the prevailing exchange rate) when it traded at 270 cents relative to 231.42 cents on LSE and 266.86 cents on JSE. Going forward it continued to trade higher on ZSE relative to other exchanges, especially in the month of October as depicted on the chart.
Some analysts have, however, cautioned against reading too much into a correlation between the Old Mutual price rally and the imminent currency move.
They attribute the higher price to the current bullish performance of the ZSE, saying there is high demand for Old Mutual’s quality shares against low supply, which, based on market fundamentals, would lead to a higher price.
This is also because the company’s financial performance is impressive relative to other counters that are listed on the local bourse.
Further, higher transaction costs on the ZSE, compared to the other exchanges, could also account for the price premium, the analysts say.- The Source
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