Monetizing TSMC Premium Before ETF Rule Change
Goldman Sachs highlights potential trades to monetize the elevated premium of Taiwan Semiconductor Manufacturing Co.'s (TSMC) arbitrage trade, which could be affected by an upcoming change in local exchange-traded fund ownership rules. The changes, potentially coming in the first half of this year, may push up TSMC's single-stock weight limit and narrow the spread between its US listing and local stock. Investors can capitalize on these dynamics by switching into the local stock or buying local shares while shorting the US listing.
- This arbitrage trade has become increasingly popular due to the enthusiasm surrounding artificial intelligence in the US, with TSMC's ADRs enjoying their highest premium since 2002.
- The rule change could also have implications for other companies with high single-stock weight limits, potentially leading to increased market volatility and trading activity.