Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

HD Hyundai Marine Solution  / Event-Driven

<ul>
<li>After a 96.5% gain on listing day, <a href="https://www.smartkarma.com/entities/hd-hyundai-marine-solution-co" target="_blank" data-smartkarma-citation="entities:41002:1" rel="noopener">HD Hyundai Marine Solution (443060 KS)</a> is very close to levels needed for <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX)</a> inclusion in June.</li>
<li>
<a href="https://www.smartkarma.com/entities/hd-hyundai-marine-solution-co" target="_blank" data-smartkarma-citation="entities:41002:1" rel="noopener">HD Hyundai Marine Solution</a> needs to outperform the 50th ranked stock in the <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">KOSPI2 INDEX</a> by 11.4% on average over the next 15 trading days to be added to the index.</li>
<li>Retail investors sold 25% of their allocation on listing day while foreign investors sold 22% of their IPO allocation with local institutions mopping up the shares.</li>
</ul>


After a 96.5% gain on listing day, HD Hyundai Marine Solution (443060 KS) is very close to levels needed for Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) inclusion in June.

HD Hyundai Marine Solution needs to outperform the 50th ranked stock in the KOSPI2 INDEX by 11.4% on average over the next 15 trading days to be added to the index.
Retail investors sold 25% of their allocation on listing day while foreign investors sold 22% of their IPO allocation with local institutions mopping up the shares.


HD Hyundai Marine Solution (443060 KS): Nearing KOSPI200 Index Inclusion in June

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

HDC Hyundai Development Co-Engineering & Construction / Equity Bottom-Up

HDC Hyundai Development Co-Engineering & Construction

<ul>
<li>In this insight, we highlight the recent pricing gap divergences of the major Korean holdcos and opcos which could provide trading opportunities in 2Q 2024.</li>
<li>Of the 38 pair trades, 26 of them involved holdcos outperforming opcos in the past six months, suggesting increased capital allocation to Korean holdcos relative to their opcos.  </li>
<li>These pairs could generate trading opportunities in terms of their pricing gaps closing reversal. [CJ Corp vs CJ Cheiljedang &amp; Hanjin KAL Corp vs Korean Air Lines].</li>
</ul>


In this insight, we highlight the recent pricing gap divergences of the major Korean holdcos and opcos which could provide trading opportunities in 2Q 2024.
Of the 38 pair trades, 26 of them involved holdcos outperforming opcos in the past six months, suggesting increased capital allocation to Korean holdcos relative to their opcos.  
These pairs could generate trading opportunities in terms of their pricing gaps closing reversal. [CJ Corp vs CJ Cheiljedang &amp; Hanjin KAL Corp vs Korean Air Lines].


Korean Holdcos Vs Opcos Gap Trading Opportunities in 2Q 2024

<ul>
<li>On 14 March, NPS announced that it has decided to vote against the re-appointment of the CEO Cho Won-tae as the executive director of Korean Air Lines.</li>
<li>It was also announced on 14 March that GS Retail purchased a 1% stake in Hanjin Kal. In addition, Korean Air Lines also purchased a 1.2% stake in GS Retail.</li>
<li>One of the growing probabilities of the changing shareholding structures is that KDB may be interested in selling its 10.6% stake in Hanjin Kal.</li>
</ul>


On 14 March, NPS announced that it has decided to vote against the re-appointment of the CEO Cho Won-tae as the executive director of Korean Air Lines.
It was also announced on 14 March that GS Retail purchased a 1% stake in Hanjin Kal. In addition, Korean Air Lines also purchased a 1.2% stake in GS Retail.
One of the growing probabilities of the changing shareholding structures is that KDB may be interested in selling its 10.6% stake in Hanjin Kal.


Another Brewing Fight for the Controlling Shareholding of Hanjin Kal?

Founder & Managing Director, AIR Control Tower, AIR Control Tower

Neil Glynn

Founder & Managing Director, AIR Control Tower

AIR Control Tower

AIR Control Tower is an independent research and analysis platform. Its mission is to provide impactful insight and analysis across the global airline industry at a company and market level via detailed financial models to aid decision making for key stake holders at a time when risks have seldom, if ever, been higher and the global sector grapples with the imperative of funding de-carbonisation. Unique analysis forecasting global carrier-level earnings/cash flows, and restructuring/de-leveraging prospects, is designed to dynamically assess the health of the industry, predict surprises and identify potential requirements for third party support.

Insights on the global airline industry

<ul>
<li>Korean Air has reported a 4Q23 net loss of KRW235bn, which is down from a profit of KRW354bn in 4Q22. We had expected KRW264bn profit but higher opex/financing costs weighed</li>
<li>We highlight 4Q23 saw KRW409bn in other financial expenses, which compared to an income of KRW322bn in 9M23. Without this, KAL would have generated profit of around KRW200bn in 4Q23</li>
<li>Pre-Pandemic, 4Q saw a near-breakeven performance (KRW17-38bn losses in 4Q18-4Q19) so a KRW184bn profit in 4Q23 still remains strong relative to pre-pandemic levels</li>
</ul>


Korean Air has reported a 4Q23 net loss of KRW235bn, which is down from a profit of KRW354bn in 4Q22. We had expected KRW264bn profit but higher opex/financing costs weighed
We highlight 4Q23 saw KRW409bn in other financial expenses, which compared to an income of KRW322bn in 9M23. Without this, KAL would have generated profit of around KRW200bn in 4Q23
Pre-Pandemic, 4Q saw a near-breakeven performance (KRW17-38bn losses in 4Q18-4Q19) so a KRW184bn profit in 4Q23 still remains strong relative to pre-pandemic levels


Korean Air - 4Q Loss Driven by Exceptional Financial Costs; Underlying Picture Healthier

<ul>
<li>The US Department of Transport (DOT) has ordered the termination of Delta and Aeromexico's joint venture from October 2024 due to access restrictions in Mexico City.</li>
<li>This follows the (unrelated) US blocking of JetBlue's planned acquisition of Spirit Airlines on the grounds that it would negatively impact consumers.</li>
<li>Each case is different, but the US has previously voiced concerns regarding Korean Air's planned merger with Asiana, and the bar continues to rise for M&amp;A/JV approval globally.</li>
</ul>


The US Department of Transport (DOT) has ordered the termination of Delta and Aeromexico's joint venture from October 2024 due to access restrictions in Mexico City.
This follows the (unrelated) US blocking of JetBlue's planned acquisition of Spirit Airlines on the grounds that it would negatively impact consumers.
Each case is different, but the US has previously voiced concerns regarding Korean Air's planned merger with Asiana, and the bar continues to rise for M&amp;A/JV approval globally.


Korean Air - Another US Example Of A Ruling Against Consolidation Raises Asiana Merger Questions

South Korea

Korean Air Lines Co., Ltd. operates air transportation services.  The Company's services include passenger and cargo transportation, aircraft maintenance, and air catering.  Korean Air Lines provides domestic and international airline services.

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Korean Air Lines (003490 KS)

HD Hyundai Marine Solution (443060 KS): Nearing KOSPI200 Index Inclusion in June

A 96.5% rally on listing day as retail and foreign investors sold and domestic instis bought. The stock is now ~11% away from KOSPI200 inclusion in...

Brian Freitas

Korean Holdcos Vs Opcos Gap Trading Opportunities in 2Q 2024

In this insight, we highlight the recent pricing gap divergences of the major Korean holdcos and opcos which could provide trading opportunities in...

Douglas Kim

Another Brewing Fight for the Controlling Shareholding of Hanjin Kal?

On 14 March, NPS announced that it has decided to vote against the re-appointment of the CEO Cho Won-tae as the executive director of Korean Air....

Douglas Kim

Korean Air - 4Q Loss Driven by Exceptional Financial Costs; Underlying Picture Healthier

Korean Air results looked disappointing at the headline level, with a 4Q23 loss. However, we point out that excluding an exceptional 4Q23 other...

Neil Glynn

Korean Air - Another US Example Of A Ruling Against Consolidation Raises Asiana Merger Questions

New perspective on the US's approach to considering M&A/joint ventures which is relevant to consider the US's ultimate verdict on Korean Air/Asiana...

Neil Glynn

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