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

<ul>
<li>
<a href="https://www.smartkarma.com/entities/hyundai-dept-store-co" target="_blank" data-smartkarma-citation="entities:19098:1" rel="noopener">Hyundai Dept Store Co (069960 KS)</a>, <a href="https://www.smartkarma.com/entities/hyundai-greenfood-co-ltd" target="_blank" data-smartkarma-citation="entities:19560:1" rel="noopener">Hyundai Greenfood (005440 KS)</a> and <a href="https://www.smartkarma.com/entities/oci-co-ltd" target="_blank" data-smartkarma-citation="entities:1904:1" rel="noopener">Oci Co Ltd (010060 KS)</a> will spin-off divisions and list them prior to the next rebalance in June.</li>
<li>The equity spin-offs will result in passive flows prior to the trading suspension as well as on relisting of the stocks post the spin-off.</li>
<li>We expect one change to the <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200-index" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX)</a> in April as one stock will be deleted due to low market cap following the spin-off.</li>
</ul>



Hyundai Dept Store Co (069960 KS), Hyundai Greenfood (005440 KS) and Oci Co Ltd (010060 KS) will spin-off divisions and list them prior to the next rebalance in June.
The equity spin-offs will result in passive flows prior to the trading suspension as well as on relisting of the stocks post the spin-off.
We expect one change to the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) in April as one stock will be deleted due to low market cap following the spin-off.


Korea Spin-Offs: Details and KOSPI200 Index Impact

Korea / Special Situations, Clepsydra Capital

Sanghyun Park

Korea / Special Situations

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

<ul>
<li>From a trading perspective, we should pay attention to the KOSPI 200 corporate actions in Hyundai Department Group's demerger events, as both companies are KOSPI 200 constituents.</li>
<li>Hyundai Green Food's surviving company won't beat the cutoff, resulting in a KOSPI 200 constituent change on April 10. Samyang Foods will be a new addition.</li>
<li>Even the size of KOSPI 200 ETFs that will likely go into mechanical trading on April 10 will cause a significant price impact from a day trading perspective.</li>
</ul>


From a trading perspective, we should pay attention to the KOSPI 200 corporate actions in Hyundai Department Group's demerger events, as both companies are KOSPI 200 constituents.
Hyundai Green Food's surviving company won't beat the cutoff, resulting in a KOSPI 200 constituent change on April 10. Samyang Foods will be a new addition.
Even the size of KOSPI 200 ETFs that will likely go into mechanical trading on April 10 will cause a significant price impact from a day trading perspective.


KOSPI 200 Ad-Hoc Change: Hyundai Greenfood Out & Samyang Foods Fresh Buy-In on April 10

<ul>
<li>In addition to Lotte Confectionery, Samyang Foods is also in the inclusion zone. As for deletions, Samyang Holdings and Boryung are the most likely deletes at this point.</li>
<li>Samyang Foods and Boryung have a small passive impact but have way more liquidity than Lotte and Samyang Holdings. We should approach them differently depending on the target trading window.</li>
<li>Samyang Foods is in a tight situation, and Boryung's fate depends on Samyang Foods. But given the recent price trends, Samyang Foods appears to have a good shot.</li>
</ul>


In addition to Lotte Confectionery, Samyang Foods is also in the inclusion zone. As for deletions, Samyang Holdings and Boryung are the most likely deletes at this point.
Samyang Foods and Boryung have a small passive impact but have way more liquidity than Lotte and Samyang Holdings. We should approach them differently depending on the target trading window.
Samyang Foods is in a tight situation, and Boryung's fate depends on Samyang Foods. But given the recent price trends, Samyang Foods appears to have a good shot.


KOSPI 200 Rebalancing: Recent Changes in the Race

<ul>
<li>The value accretion that will occur by unlocking treasury shares will be more significant than Hyundai Dept. The treasury shares account for 10.64%, compared with 6.61% for Hyundai Dept.</li>
<li>Neither Holdco nor Opco will likely remain in the KOSPI 200 after relisting. So we cannot expect PASSIVE inflow at the time of relisting.</li>
<li>A tender will likely follow. However, neither is available for shorting. So, we should use Opco's overheated price adjustment as an exit timing for our positions aimed at value accretion.</li>
</ul>


The value accretion that will occur by unlocking treasury shares will be more significant than Hyundai Dept. The treasury shares account for 10.64%, compared with 6.61% for Hyundai Dept.
Neither Holdco nor Opco will likely remain in the KOSPI 200 after relisting. So we cannot expect PASSIVE inflow at the time of relisting.
A tender will likely follow. However, neither is available for shorting. So, we should use Opco's overheated price adjustment as an exit timing for our positions aimed at value accretion.


Trading Angles of Hyundai Green Food Demerger, with Potential Tender & Hive-Off

<ul>
<li>This is an equity spinoff where the existing shareholders receive shares in the spun-off company. But this creates two LISTED companies. In such a case, there won't be appraisal rights.</li>
<li>PASSIVE's selling flow towards the trade suspension tends to be offset by ACTIVE's buying flow aiming for value accretion. So, developing a timely entry/exit between these opposing flows is critical.</li>
<li>Holdco's 30% rule dynamic generally, in relative terms, leads to an increase in the value of Opco's stake and a decline in the value of Holdco's stake.</li>
</ul>


This is an equity spinoff where the existing shareholders receive shares in the spun-off company. But this creates two LISTED companies. In such a case, there won't be appraisal rights.
PASSIVE's selling flow towards the trade suspension tends to be offset by ACTIVE's buying flow aiming for value accretion. So, developing a timely entry/exit between these opposing flows is critical.
Holdco's 30% rule dynamic generally, in relative terms, leads to an increase in the value of Opco's stake and a decline in the value of Holdco's stake.


A Walkthrough of Hyundai Department Store Demerger Event

South Korea

Hyundai G.F. Holdings Co., Ltd. operates as a office furniture distribution company. The Company produces built in furniture, upcycling waste materials bottles furniture, wood furniture, and other related products. Hyundai G.F. Holdings also offers food, information and technology, groceries sale, and food materials distribution services.

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Hyundai G.F. Holdings (005440 KS)

Korea Spin-Offs: Details and KOSPI200 Index Impact

There are three KOSPI200 members that are doing an equity spin-off in the next few months. Two will re-enter the index while one will be deleted....

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KOSPI 200 Ad-Hoc Change: Hyundai Greenfood Out & Samyang Foods Fresh Buy-In on April 10

This post investigates KOSPI 200 ad-hoc change possibility resulting from Hyundai Greenfood's failure to meet the cutoff, which will lead to the...

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KOSPI 200 Rebalancing: Recent Changes in the Race

This post investigates the recent changes in the upcoming rebalancing of the KOSPI 200 and discusses the resulting passive impacts and trading...

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Trading Angles of Hyundai Green Food Demerger, with Potential Tender & Hive-Off

This post is a deep-dive investigation into the Hyundai Green Food demerger event, with a potential tender offer and hive-off that will likely...

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A Walkthrough of Hyundai Department Store Demerger Event

This post is a detailed walkthrough of the Hyundai Department Store demerger, officially announced last Friday. It includes the demerger process...

Sanghyun Park

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