US Congress to block DP bid on P&O: Arb Opp?

Catching the tail-end of the P&O bid war between DP World and PSA, there may still be some room to find an arb. Congress is looking to block the sale. From the text of the article it looks like President carter is saying the Bush Administratio will push this forward.

I don't have the time to model it out but here are the basics to set up a game around:

4 players: Bush, Congress, DP World, PSA.
1 result: P&O price.

1st stage:
-2 determinants: Bush, Congress
-1 outcome: veto, no veto
2nd stage:
-default PSA as no move
-DP World move (go bid, no bid)
3rd stage:
-if veto and DP World go bid, P&O price = 520 pence
-if veto and DP World no bid, P&O price = 470 pence
-if no veto and DP World go bid, P&O price = 520 pence
-if no veto and DP World no bid, P&O price = 470 pence

You can add complexity to the second stage moves by factoring in PSA making additional bids.
(ie. on condition that veto appears imminent and DP modifies its bid for a P&O minus US ports.)

You can also plug-in exchange rate fluctuations if you're looking to go high volume low spreads.

the assumptions i have are the feb. 10th bids:
DP World: 3.9 billion pounds sterling
PSA: 3.2 billion pounds sterling

100 pence = 1 pound sterling

(on a side note, and since I love to relate everything back to the China factor, this is all too reminiscent of CNOOC style protectionism, which is a theme that is definitely worth keeping a pulse on. There is President Hu's visit in April coming up, then the US Treasury report on Money Tampering. Keep an eye out on my forex and pacific market watch for more commentary and thoughts.)

Arb Opp: CNY Play

On the back of RMB re-valuation; based on the terms set forth, it seems that the RMB will trade within a band allowing for a limited variation before the Central Bank intercedes to bring the RMB back in line.

Now if anyone has the time, inclination, and most notably regression skill set, an interesting experiment would be to try and determine the basket of currencies that the Central bank is using to guage the RMB against.

If it's a beta-mitigating basket then there are any number of holdings it could have (the more archaic the more diversification offered). Likely this is not the case as the central government is more concerned with global economic sensitivity so that China's trade balance with its major partners is less in flux.

I would say the major holdings in order of magnitude:
USD
JPY
EURO
GBP
WON

Then a mixed bag of other AXJ currencies, and materials trackers for gold.

I'd set initial guesses at 60% USD, 15% JPY, 15% EURO, 5% AXJ, 5% mixed bag.

Well I definitely do not have the time nor even the resources to commit to a project like this. It's tough to say exactly what the takeaway would be. The CNY is trading in such a tight band that you may be better off playing volatility on technical signs. Though if you could track the central bank interventions and feasibly predict the conditions under which the intervention occurs. You could real-time it together and give yourself buy/sell signs. Again, worth it? I'll be lucky if I can pay back my student-loans in time to have tradeable funds to play against 2008 olympic fever, let alone get a server, dbase, data feeds, on the proposition of playing my miniscule savings in a high volume, high frequency space where leverage and low margins are key.

The CNY story is one worth learning as it will be one of the key focus points as 'globalisation' ushers in. (ie. the CNY will face pressure to re-value, but without adequate financial depth, it will cause instability for China. Without revaluation, it will contribute to instability globally. My take is that the globabl economy is dynamic enough and the global players invested enough to flex the markets to handle a slow revaluation by rebalancing other forex, c/a, equity, credit, commodity, and liquid markets overall to dissipate the pressure of a fixed peg.)