The law of one price

FT.com Arbitraging Chinese stocks:

"Can anyone exploit the $75bn arbitrage opportunity? Companies can. They could raise equity in Shanghai and use the proceeds to repurchase Hong Kong shares at a premium to their market price. Whether state-controlled companies are prepared to exploit so openly the appetite of mainlanders to overpay for equity is doubtful. But they are beginning to do something fairly similar by raising money in Shanghai to buy real assets, to which Hong Kong shareholders will have a pro-rata claim. PetroChina has just said it will raise $6bn. Others without Shanghai listings like CNOOC and China Mobile should pile in too. They will help prick a bubble and raise dirt cheap capital, which should keep the state and foreign investors happy respectively. Pity, though, China’s punters."