JM owns 85 per cent of JS, which in turn holds 58 per cent of JM."There's circularity there, it's like a snake swallowing its own tail, so the two should be highly correlated," Mr Blennerhassett said.
Anyone who had bet on a mean-reversion by shorting JM and buying JS when the ratio began shooting to unprecedented highs earlier this week would have been squeezed, he added:"What it came down to was the trade was to go short JM and long JS based on the long-term ratio, which hasn't worked because markets have gyrated. And it's completely distorting things... Earlier this week at a ratio of 2.1 I thought it was a buy... now I'm running out of superlatives.
He added:"To understand Jardine Strategics' fall, it's best to look at its constituents. People sell those components and it feeds through."
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Source: The Straits Times - 🏆 8. / 63 Read more »