GXY 0.00% $5.28 galaxy resources limited

Very interesting chart. One thing to note is that valuation gaps...

  1. 765 Posts.
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    Very interesting chart. One thing to note is that valuation gaps like these (such as the one between Ganfeng and GXY) are usually closed by arbitrageurs who short the higher to buy the lower - they don't necessarily have a view as to the direction the sector is headed, they just know that in general these two shares should converge since their fates depend on the same commodity.

    As such, the fact that china has now banned short selling in order to prevent a market panic might materially delay any convergence between these securities. While it's possible we'll still see them converge on the same 6 month delay, I would not be at all surprised if the aussies continued to lag ganfeng until china lifts its short-selling ban - or at least, that they will converge much more slowly than they have done historically speaking.
    Last edited by Shadyjames: 17/02/20
 
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