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.

Event-Driven

<ul>
<li>The additional Lotte Confectionery/Samyang Holdings flow will come from K200/KRX 300 Consumer Staples, K200 MidSmallCap, and K200 Ex-Top. However, the actual flow impact wouldn't be significant.</li>
<li>From a flow trading standpoint, the KOSPI 50's HMM/Hanon System probably deserves our attention because additional inflows come from the pensions that account for more than half of local PASSIVE.</li>
<li>Since their rebalancing trading tends to be somewhat dispersed, the return rate was the best when the position holding period was from T-3 to the effective date.</li>
</ul>


The additional Lotte Confectionery/Samyang Holdings flow will come from K200/KRX 300 Consumer Staples, K200 MidSmallCap, and K200 Ex-Top. However, the actual flow impact wouldn't be significant.
From a flow trading standpoint, the KOSPI 50's HMM/Hanon System probably deserves our attention because additional inflows come from the pensions that account for more than half of local PASSIVE.
Since their rebalancing trading tends to be somewhat dispersed, the return rate was the best when the position holding period was from T-3 to the effective date.


KOSPI 200 Sector/Size & KRX 300 Sector: Constituent Changes & Trading Points

<ul>
<li>Value accretion by unlocking the voting eligibility of treasury shares won't happen as the company holds no treasury share.</li>
<li>But KOSPI 200 passive flows will pose a noteworthy trading point. PASSIVE's selling outflow will be about 700-800K shares, 1.6x ADTV.</li>
<li>Market cap imbalance, primarily driven by the tender offer dynamic and the split ratio that is excessively focused on Holdco, will likely exacerbate Holdco → Opco migration after re-listing.</li>
</ul>


Value accretion by unlocking the voting eligibility of treasury shares won't happen as the company holds no treasury share.
But KOSPI 200 passive flows will pose a noteworthy trading point. PASSIVE's selling outflow will be about 700-800K shares, 1.6x ADTV.
Market cap imbalance, primarily driven by the tender offer dynamic and the split ratio that is excessively focused on Holdco, will likely exacerbate Holdco → Opco migration after re-listing.


Trading Considerations on the OCI Demerger

<ul>
<li>For KOSDAQ 150, SillaJen and WCP made it to the index. As for deletions, Intron Biotechnology, Ebest I&amp;S, and Devsisters are additional names to leave the index through regular review.</li>
<li>Lotte Confectionery and Samyang Holdings do not have sizeable DTV. And they were fully expected. Nevertheless, the passive impact is so significant that the LONG/SHORT approach still seems valid.</li>
<li>We should focus on KOSDAQ 150 inclusions whose return has been high due to the inflow to secure a borrow pool for short-selling on top of the preemptive rebalancing flow.</li>
</ul>


For KOSDAQ 150, SillaJen and WCP made it to the index. As for deletions, Intron Biotechnology, Ebest I&amp;S, and Devsisters are additional names to leave the index through regular review.
Lotte Confectionery and Samyang Holdings do not have sizeable DTV. And they were fully expected. Nevertheless, the passive impact is so significant that the LONG/SHORT approach still seems valid.
We should focus on KOSDAQ 150 inclusions whose return has been high due to the inflow to secure a borrow pool for short-selling on top of the preemptive rebalancing flow.


KOSPI 200 & KOSDAQ 150 Constituent Changes: Several Surprises

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<ul>
<li>Korea Exchange announced the KOSPI 200, KOSDAQ 150, and KRX 300 rebalance changes today. Lotte Confectionery will be added and Samyang Holdings will be deleted from the KOSPI 200 index.</li>
<li>The rebalances of these Korean indices are regularly updated twice a year. The changes to these indices will be effective starting 9 December. </li>
<li>The potential exclusion candidates for KOSPI 200 in 2023 include K Car, Handsome, HS Enterprise, Zinus, and Hyundai Home Shopping. </li>
</ul>


Korea Exchange announced the KOSPI 200, KOSDAQ 150, and KRX 300 rebalance changes today. Lotte Confectionery will be added and Samyang Holdings will be deleted from the KOSPI 200 index.
The rebalances of these Korean indices are regularly updated twice a year. The changes to these indices will be effective starting 9 December. 
The potential exclusion candidates for KOSPI 200 in 2023 include K Car, Handsome, HS Enterprise, Zinus, and Hyundai Home Shopping. 


KOSPI 200 & KOSDAQ 150 Rebalance Changes + KOSPI 200 & KOSDAQ 150 Exclusion Candidates in 2023

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

Index Rebalance

<ul>
<li>There will be 1 addition and 1 deletion for 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> at the December rebalance that will be implemented on 8 December.</li>
<li>
<a href="https://www.smartkarma.com/entities/lotte-confectionery-co-ltd-1feb0155-08b6-44eb-bdbd-8d67cf757dac" target="_blank" data-smartkarma-citation="entities:25993:1" rel="noopener">Lotte Confectionery (280360 KS)</a> was a high probability add while <a href="https://www.smartkarma.com/entities/samyang-holdings-corp" target="_blank" data-smartkarma-citation="entities:13761:1" rel="noopener">Samyang Holdings (000070 KS)</a> was the second delete on the list. <a href="https://www.smartkarma.com/entities/hyundai-home-shopping-network-corp" target="_blank" data-smartkarma-citation="entities:2357:1" rel="noopener">Hyundai Home Shopping Network (057050 KS)</a> avoided deletion.</li>
<li>Passive trackers will need to buy around 14 days of ADV on <a href="https://www.smartkarma.com/entities/lotte-confectionery-co-ltd-1feb0155-08b6-44eb-bdbd-8d67cf757dac" target="_blank" data-smartkarma-citation="entities:25993:1" rel="noopener">Lotte Confectionery (280360 KS)</a> and sell nearly 13 days of ADV on <a href="https://www.smartkarma.com/entities/samyang-holdings-corp" target="_blank" data-smartkarma-citation="entities:13761:1" rel="noopener">Samyang Holdings (000070 KS)</a>.</li>
</ul>


There will be 1 addition and 1 deletion for the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the December rebalance that will be implemented on 8 December.

Lotte Confectionery (280360 KS) was a high probability add while Samyang Holdings (000070 KS) was the second delete on the list. Hyundai Home Shopping Network (057050 KS) avoided deletion.
Passive trackers will need to buy around 14 days of ADV on Lotte Confectionery (280360 KS) and sell nearly 13 days of ADV on Samyang Holdings (000070 KS).


KOSPI200 Index Rebalance: Just One Change

South Korea

Lotte Confectionery Co., Ltd. operates as a snack food manufacturing company. The Company produces and sells chewing gum, candy, biscuits, chocolates, pies, snacks, and other products. Lotte Confectionery markets its products worldwide.

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Lotte Confectionery (280360 KS)

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Douglas Kim

KOSPI200 Index Rebalance: Just One Change

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Brian Freitas

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