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.

Index Rebalance

<ul>
<li>KOSPI Size Index Series rebalances twice a year in March and September. The base date is February 28. It is a three-month review, so, from December 1 to February 28.</li>
<li>In the KOSPI size index rebalancing, an increase in the buying volume of local institutions for stocks moving from LargeCap to MidCap is generally detected. </li>
<li>14 new MidCap entrants are expected to have a sizable passive impact.</li>
</ul>


KOSPI Size Index Series rebalances twice a year in March and September. The base date is February 28. It is a three-month review, so, from December 1 to February 28.
In the KOSPI size index rebalancing, an increase in the buying volume of local institutions for stocks moving from LargeCap to MidCap is generally detected. 
14 new MidCap entrants are expected to have a sizable passive impact.


KOSPI Size Index Series Rebalancing Screening Results

Event-Driven

<p>We now have KOSPI 200 and KOSDAQ 150 rebalancing completed. What does this mean? It means we have new members of the so-called Korea Short 350 as these new additions are now eligible for short selling.</p><p>So, let's look at their current loan balance, often serving as a leading indicator of short-selling intensity in the short term.</p>

We now have KOSPI 200 and KOSDAQ 150 rebalancing completed. What does this mean? It means we have new members of the so-called Korea Short 350 as these new additions are now eligible for short selling.So, let's look at their current loan balance, often serving as a leading indicator of short-selling intensity in the short term.

Korea Short 350 New Members: KOSPI 200 & KOSDAQ 150 Adds

What would be a real-world passive money size tracking KOSPI 200?My latest estimation is ₩80 trillion, and here is a breakdown of my estimation.ETFsWe currently have 17 local ETFs mirroring KOSPI 200, including KODEX 200 (₩5.5T) and TIGER 200 (₩2.3T). Their combined market value amounts to ₩16.5T.







Local ETFs directly mirroring KOSPI 200
Ticker
Market cap as of today (June 1, 2021)


YURIE TREX 200 ETF
108590
₩13.0B


Kiwoom KOSEF200 Total Return ETF
294400
₩493.3B


Kyobo AXA Power K200 ETF
152870
₩28.6B


Samsung KODEX 200 Total Return ETF
278530
₩1,470.5B


Mirae Asset TIGER Leverage ETF
123320
₩32.1B


KIM KINDEX Leverage ETF
152500
₩11.1B


HANWHA Arirang 200 ETF
152100
₩853.6B


Samsung KODEX 200 ETF
069500
₩5,446.8B


Kiwoom KOSEF200 ETF
069660
₩542.8B


Mirae Asset TIGER200 ETF
102110
₩2,283.6B


KIM KINDEX 200 ETF
105190
₩751.7B


Samsung KODEX Leverage Derivatives ETF
122630
₩1,722.2B


KB KBSTAR 200 Securities ETF
148020
₩1,168.8B


NH-Amundi HANARO 200 ETF
293180
₩655.5B


NH-Amundi HANARO 200TR ETF
332930
₩222.4B


KIM KINDEX 200TotalReturn ETF
332500
₩340.5B


Shinhan SMART 200 Total Return ETF
295040
₩449.9B


- Total
-
₩16,486.4B

Source: KRX

Index funds39 local index funds are currently tracking KOSPI 200, including the Kyobo AXA Power Index with an AUM of ₩1.3T. Their combined AUM totals ₩3.7T.






Local Index funds directly mirroring KOSPI 200
Assets under management as of today (June 1, 2021)


Kiwoom New Frontier Index Plus αF- 1 [Equity-Derivative] A1
₩17.5B


Kiwoom e-Alpha Index 1 [Equity]
₩11.0B


Kiwoom Korea Index 1 [Equity] C-e
₩28.1B


Kiwoom Korea Happy Pension Index 1 [Equity]
₩16.6B


Korea Investment Index Plus 1 [Equity-Derivative] (A)
₩28.4B


BNKK200 Index (Equity-Derivative) ClassA
₩25.4B


KB Star Power Index Korea [Equity-Derivative] C-E
₩18.3B


Hungkuk Index Alpha [Equity-Derivative] C-f
₩17.9B


Daishin Index Value [Equity] ClassC-F
₩130.5B


Mirae Asset Market Plus [Equity] Type F
₩11.8B


Consus Moebius 1 200 Index (Equity-Derivative) Class C
₩11.0B


IBKKOSPI200 Index 1 [Equity] Type A
₩39.8B


Truston Index Alpha s [Equity-Derivative] C
₩14.5B


Hyundai KOSPI 200 Index Type C-f
₩10.2B


DGB Index Plus 1 [Equity-Derivative] A
₩27.6B


Woori KOSPI200 Index 1 (Equity-Derivative) ClassC-e
₩49.1B


Kyobo AXA Power Index 2 [Equity] ClassA1
₩22.5B


East Spring Korea Index [Equity] Class C-F
₩207.0B


Mirae KOSPI 200 Index 1 [Equity] Type C-e
₩164.0B


Kyobo AXA Power Index 1 [Equity] Class A 1
₩332.0B


Kyobo AXA Power Index 3 [Equity] ClassA
₩12.6B


Daishin KOSPI200 Index [Equity-Derivative] ClassC1
₩64.1B


Kyobo AXA Power Index 1 (Equity-Derivative) ClassA
₩1,277.0B


DB Index Haeohreum Alpha [Equity-Derivative] ClassA
₩15.5B


Hana UBS Umbrella New Index K- 1 [Equity-Derivative] ClassC
₩12.9B


Samsung Retirement Pension Index 1 [Equity] C
₩138.7B


Korea Investment &amp; Cruise F2.8 Index [Equity] (A)
₩14.1B


KB Index Annuity [Equity] C
₩20.6B


Samsung Index Alpha 1 [Equity-Derivative] (A)
₩18.6B


Samsung Pension Korea Index [Equity-Derivative]
₩34.6B


Samsung Classic Index Pensions 1 [Equity] _C
₩180.6B


KB Star Korea Index [Equity] C-E class
₩88.8B


Samsung Premium Index A [Equity-Derivative]
₩74.2B


Hanwha Smart ++ Index [Equity] C / C2β
₩240.4B


Feynman Index Premium 2 [Equity-Derivative]
₩18.8B


Samsung Index Plus 1 [Equity-Derivative] (C 1)
₩49.7B


KB Star Korea Index [Equity-Derivative] C
₩54.1B


NH-Amundi Premier Index [Equity-Derivative] ClassA
₩26.7B


Hyundai Investment Index 1 Alpha [Equity-Derivative] C-I
₩135.5B


- Total
₩3,660.7B

Source: KG Zeroin

National Pension Service (NPS)Now, we need to add NPS. In 2019, the internal (direct) management accounted for 54.15% of the domestic equity, whereas the external (consignment) management was responsible for 45.85%. Only the internal management operates passive funds, which accounted for 33.75% of the total domestic equity.The total domestic equity at March-end of this year was ₩178.7T. Assuming the same 33.75% weight for the passive in the domestic equity churns out ₩60.3T for the local passive funds within the NPS. An assumed 70% of this ₩60.3T would be ₩42.2T, supposedly tracking KOSPI 200. 70% should be a conservative assumption as their BM index for domestic equity is KOSPI.









NPS asset allocation
FY2019, amount
FY2019, weight
FY2021 March, amount
Directly mirroring KOSPI 200 at an assumed 70% of the total passive funds


Internal (direct) management
₩71,612.1B





- Active
₩26,976.9B
20.40%




- Passive
₩44,635.2B
33.75%
₩60,301.4B
₩42,211.0B


External (consignment) management
₩60,641.9B





- Active
₩60,641.9B
45.85%




- Passive
₩0.0B
0.00%




Total domestic Equity
₩132,254.0B

₩178,673.0B


Source: NPS

Variable insurance index fundsLastly, we have variable insurance index funds. A vast majority of the local variable insurance index funds are tracking KOSPI 200. I don't have the latest figure, but the FY2019 year-end data (compiled by YONHAP INFOMAX) shows that the combined AUM of these funds amounted to about ₩17~18T.Given the relatively flat yearly growth among the local insurance companies, I don't expect to see a substantial change in the combined AUM last year. So, ₩18T would be a safe estimate.Adding all four spits out ₩80.4T, supposedly total local passive money mirroring KOSPI 200 at this point.
₩80T estimation breakdown

ETFs
₩16.5T


Index funds
₩3.7T


National Pension Service - Passive
₩42.2T


Variable Insurance Index funds
₩18.0T


 - Total
₩80.4T

Source: KG Zeroin, KRX, NPS, &amp; YONHAP INFOMAX


Why I Estimate Total Local Passive Money Tracking KOSPI 200 at ₩80T? Here Is a Breakdown

<div><p>Korea has mainly three types of local institutions passively mirroring KOSPI 200.</p></div><div><ol style="list-style-type: decimal;">
<li><strong>ETFs and conventional index funds (40%)</strong></li>
<li><strong>Variable insurance index funds (30%)</strong></li>
<li><strong>NPS-financed index funds (30%)</strong></li>
</ol></div><div><p>We can track local institutional trade volume by 9 types daily. The KRX offers the data.</p></div><div>
<ul style="list-style-type: disc;">
<li>ETFs and conventional index funds fall into the category of <strong>Public Offering Fund</strong>.</li>
<li>NPS-financed index funds are grouped in <strong>Pension Fund</strong>. </li>
<li>Variable insurance index funds are categorized as <strong>Insurance</strong>.</li>
</ul>
<p>Typically, the NPS-financed index funds and variable insurance index funds begin to rebalance their portfolios as early as two weeks ahead of the application date. The public offering funds, mostly ETFs, concentrate on the last day, understandably minimizing the tracking error.</p>
<p>NPS and Insurance combined account for about 60% of the total local passive money mirroring KOSPI 200.</p>
<p>So, I tracked the net trade of Pension and Insurance on May 25~28 for each of the additions and deletions to gauge the remaining capacity of the passive flow impact. The KRX announced the rebalancing results on May 25, which should have been the starting point of the passive flow by Pension and Insurance.</p>
</div>

Korea has mainly three types of local institutions passively mirroring KOSPI 200.
ETFs and conventional index funds (40%)
Variable insurance index funds (30%)
NPS-financed index funds (30%)
We can track local institutional trade volume by 9 types daily. The KRX offers the data.

ETFs and conventional index funds fall into the category of Public Offering Fund.
NPS-financed index funds are grouped in Pension Fund. 
Variable insurance index funds are categorized as Insurance.

Typically, the NPS-financed index funds and variable insurance index funds begin to rebalance their portfolios as early as two weeks ahead of the application date. The public offering funds, mostly ETFs, concentrate on the last day, understandably minimizing the tracking error.
NPS and Insurance combined account for about 60% of the total local passive money mirroring KOSPI 200.
So, I tracked the net trade of Pension and Insurance on May 25~28 for each of the additions and deletions to gauge the remaining capacity of the passive flow impact. The KRX announced the rebalancing results on May 25, which should have been the starting point of the passive flow by Pension and Insurance.


KOSPI 200 Rebalancing: Local Passive Flow Tracking

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<div class="content-highlight">
<p>KRX announced today after the market close the changes in the constituents for KOSPI 200, KOSDAQ 150, and KRX 300 indices. There were 5 stocks that were added and 7 stocks that were deleted in KOSPI 200. As a result of the being included in the KOSPI 200, the five new additions will be subject to potential short selling. These five stocks have done really well in the past few months and some investors could be taking some short positions on them. </p>
<p>We have also provided the impact of the additions and deletions of KOSPI 200 on their share prices post the announcements in November 2020 and May 2020 in terms of 20 trading days after the KOSPI 200 rebalance announcement dates. </p>
<p>Although the November 2020 rebalance showed the additions far outperforming the deletions (20 trading days after announcement date), this trend reversed in the May 2020 rebalance. These data points suggest lack of a definitive conclusion on taking long/short position post the announcement date. In addition, the regulators have allowed shorting for only the stocks included in KOSPI 200 and KOSDAQ 150, making it even more difficult to short stocks that are excluded from these indices.</p>
</div>


KRX announced today after the market close the changes in the constituents for KOSPI 200, KOSDAQ 150, and KRX 300 indices. There were 5 stocks that were added and 7 stocks that were deleted in KOSPI 200. As a result of the being included in the KOSPI 200, the five new additions will be subject to potential short selling. These five stocks have done really well in the past few months and some investors could be taking some short positions on them. 
We have also provided the impact of the additions and deletions of KOSPI 200 on their share prices post the announcements in November 2020 and May 2020 in terms of 20 trading days after the KOSPI 200 rebalance announcement dates. 
Although the November 2020 rebalance showed the additions far outperforming the deletions (20 trading days after announcement date), this trend reversed in the May 2020 rebalance. These data points suggest lack of a definitive conclusion on taking long/short position post the announcement date. In addition, the regulators have allowed shorting for only the stocks included in KOSPI 200 and KOSDAQ 150, making it even more difficult to short stocks that are excluded from these indices.


KOSPI 200, KOSDAQ 150, & KRX 300 Indices Rebalance Changes - May 2021

South Korea

Hyosung TNC Co. Ltd. manufactures and distributes fiber products. The Company produces nylon, polyester yarns, fabrics, and other related products. Hyosung TNC also trades steel and chemicals.

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Hyosung TNC Co Ltd (298020 KS)

KOSPI Size Index Series Rebalancing Screening Results

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Korea Short 350 New Members: KOSPI 200 & KOSDAQ 150 Adds

We now have new members of the so-called Korea Short 350 for short-selling eligibility. They are new additions to KOSPI 200 and KOSDAQ 150. This...

Sanghyun Park

Why I Estimate Total Local Passive Money Tracking KOSPI 200 at ₩80T? Here Is a Breakdown

This post provides a detailed breakdown of how I arrive at an estimated ₩80 trillion for the passive money tracking KOSPI 200.

Sanghyun Park

KOSPI 200 Rebalancing: Local Passive Flow Tracking

This post tracks the net trade of Pension and Insurance on May 25~28 for each of the KOSPI 200 additions and deletions to gauge the remaining...

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KOSPI 200, KOSDAQ 150, & KRX 300 Indices Rebalance Changes - May 2021

In this insight, we discuss the implications of the additions and deletions of KOSPI 200, KOSDAQ 150, & KRX 300 on the Korean stock market.

Douglas Kim

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