morgan stanley has taken a 5% stake in axo, page-4

I highly doubt so.

The huge positions UBS and Morgan Stanley have built up are likely representing some fund manager who is taking advantage of any spread larger than what they would have been able to earn in cash interest. So essentially they would buy AXO and short AGO. Of course this trade is based on the assumption that the takeover goes through, therefore is not truly an risk free arbitrage trade.

If you look at the short interest on the ASX website, I believe you will see that AGO is THE stock that has the highest percentage of short interest as a percentage of outstanding shares. I can't remember what is the exact figure, so if anyone is really interested, you can follow up on this.