The popular Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) arbitrage trade might soon see a change in dynamics that could affect the trading of the US listing versus the local one. And for anyone who wants to monetize the elevated premium, Goldman Sachs Group Inc highlights potential trades.
A note from the bank’s sales desk published on Friday said that demand for TSMC’s Taipei-traded stock could rise as Taiwan’s regulator is considering an amendment to local exchange-traded funds’ (ETFs) ownership.
The changes, which could come in the first half of this year, could push up the current 30 percent single-stock weight limit and affect allocations to the shares. As a result, the spread between the two listings could narrow.
Photo: CNA
“This presents an interesting opportunity for investors to monetize the premium in the [American depository receipts] ADR,” it said.
Existing holders of TSMC’s ADRs could do so by switching into the local stock. Those interested in capturing the narrowing spread could buy the local shares while shorting the US listing, Goldman Sachs said.
The enthusiasm for artificial intelligence in the US since the rise of ChatGPT has pushed the premium of TSMC’s ADRs over the local listing to its highest average this quarter since 2002. As of Friday, the US shares’ premium was near 19 percent, compared with about 10 percent for the five-year average.
Risks related to US President Donald Trump’s tariff policy and a potential partnership with Intel Corp could lead to more volatility and profit taking on TSMC’s ADRs, Goldman Sachs added.
The US-traded shares have gained almost 140 percent since the release of ChatGPT, more than the 123 percent increase in the local listing through Friday and far beating the 82 percent rise in a global gauge of semiconductors.
TSMC fell 1.83 percent to close at NT$1,075 in Taipei trading yesterday.
“Selling of TSMC came as many investors were still worried that the Trump administration’s trade war will pressure the chipmaker to invest more in the US,” Hua Nan Securities Co (華南永昌證券) analyst Kevin Su (蘇俊宏) said.
Additional reporting by CNA
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