By Jonathan Weil
It didn't last long, but for a brief moment on Monday, one of the stock market's most fascinating anomalies almost went away.
At Monday's intraday low, Taiwan Semiconductor Manufacturing's New York-listed depositary receipts were valued at only about a 5% premium to the price the shares closed at on Taiwan's stock exchange. They have traded at a 20% premium or higher for much of the past two years, including last week.
By the time trading in New York closed Monday, the U.S. version had rebounded and was valued at a 14% premium to the Taiwan-listed shares. When trading re-opened again in New York, the U.S. version was back at about a 22% premium to the Taiwan stock, which declined overnight.
The discrepancy between TSMC's stock price in Taiwan and the U.S. is a violation of the Law of One Price, which holds that identical goods should have identical prices. Things like this happen occasionally, but generally not at companies as large as TSMC, which had a stock-market value of more than $1 trillion at its peak in January.
In an article in October about the anomaly, Acadian Asset Management portfolio manager Owen Lamont said "this mispricing is stupid, chaotic, and embarrassing," describing it as "one piece of evidence that the U.S. stock market is approaching bubble territory."
Some unusual events over the last few days may have influenced the temporary narrowing of the discrepancy. Thursday and Friday were market holidays in Taiwan, so the stock didn't trade there on those days. Then on Sunday, Taiwan's securities regulator said it would tighten controls on short-selling activity by limiting orders and raising margin requirements.
The two prices for TSMC stock came close to converging, but then the gap rewidened and the anomaly lives on. It bears watching. More odd trading patterns could be seen in one of the world's most important companies, especially if the Trump administration follows through on promises for semiconductor-specific tariffs.
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(END) Dow Jones Newswires
April 08, 2025 11:02 ET (15:02 GMT)
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