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

<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

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

<p>The KRX has announced the list of inclusions and exclusions 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> today. The rebalance is effective after the close of trading on 10 June.</p><p>There are 5 inclusions and 7 exclusions at the June 2021 review. If <a href="https://www.smartkarma.com/entities/sk-ie-technology" target="_blank" data-smartkarma-citation="entities:29207:1" rel="noopener">SK IE Technology (361610 KS)</a> meets the criteria for index Fast Entry, then <a href="https://www.smartkarma.com/entities/hdc-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:7699:1" rel="noopener">HDC Holdings (012630 KS)</a> will be deleted and the announcement will be made on 2 June.</p><p>So, there could be a total of 6 inclusions and 8 exclusions at the review with a one-way turnover of 0.77%.</p><p>The inclusions and exclusions are:</p><table class="table table-striped">
<colgroup>
<col>
<col>
<col>
<col>
</colgroup>
<tbody>
<tr>
<td colspan="2" style="text-align: center; width: 222pt;"><h3>Inclusions</h3></td>
<td colspan="2" style="text-align: center; width: 273pt;"><h3>Exclusions</h3></td>
</tr>
<tr>
<td><strong>Code</strong></td>
<td><strong>Name</strong></td>
<td><strong>Code</strong></td>
<td><strong>Name</strong></td>
</tr>
<tr>
<td>302440.KS</td>
<td>SK Bioscience Co Ltd</td>
<td>005180.KS</td>
<td>Binggrae Co Ltd</td>
</tr>
<tr>
<td>006040.KS</td>
<td>Dongwon Industries Co Ltd</td>
<td>005610.KS</td>
<td>SPC Samlip Co Ltd</td>
</tr>
<tr>
<td>298050.KS</td>
<td>Hyosung Advanced Materials Corp</td>
<td>006390.KS</td>
<td>Hanil Hyundai Cement Co Ltd</td>
</tr>
<tr>
<td>298020.KS</td>
<td>Hyosung TNC Corp</td>
<td>008350.KS</td>
<td>Namsun Aluminium Co Ltd</td>
</tr>
<tr>
<td><em><strong>361610.KS</strong></em></td>
<td><em><strong>SK IE Technology Co Ltd</strong></em></td>
<td>009410.KS</td>
<td>Taeyoung Engineering &amp; Construction Co Ltd</td>
</tr>
<tr>
<td>001440.KS</td>
<td>Taihan Electric Wire Co Ltd</td>
<td>018250.KS</td>
<td>Aekyung Industrial Co Ltd</td>
</tr>
<tr>
<td></td>
<td></td>
<td>145990.KS</td>
<td>Samyang Corp</td>
</tr>
<tr>
<td></td>
<td></td>
<td><em><strong>012630.KS</strong></em></td>
<td><em><strong>HDC Holdings Co Ltd</strong></em></td>
</tr>
</tbody>
</table><p>There are 12 trading days to implementation of the changes and there are a lot of deletions that have over 1 day of ADV to trade. The impact on the inclusions is smaller but there will be a lot of active funds looking to buy the stocks so they don't deviate too much from their benchmark.</p><p>With short selling limited to the constituents of 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>, shorting the inclusions will be tough while selling/shorting the deletions is a lot easier since they are current index constituents. The inclusions could outperform the deletions till a couple of days before implementation date, while there could be a high risk/reward reverse trade if the outperformance is significant.</p>

The KRX has announced the list of inclusions and exclusions to the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) today. The rebalance is effective after the close of trading on 10 June.There are 5 inclusions and 7 exclusions at the June 2021 review. If SK IE Technology (361610 KS) meets the criteria for index Fast Entry, then HDC Holdings (012630 KS) will be deleted and the announcement will be made on 2 June.So, there could be a total of 6 inclusions and 8 exclusions at the review with a one-way turnover of 0.77%.The inclusions and exclusions are:








Inclusions
Exclusions


Code
Name
Code
Name


302440.KS
SK Bioscience Co Ltd
005180.KS
Binggrae Co Ltd


006040.KS
Dongwon Industries Co Ltd
005610.KS
SPC Samlip Co Ltd


298050.KS
Hyosung Advanced Materials Corp
006390.KS
Hanil Hyundai Cement Co Ltd


298020.KS
Hyosung TNC Corp
008350.KS
Namsun Aluminium Co Ltd


361610.KS
SK IE Technology Co Ltd
009410.KS
Taeyoung Engineering &amp; Construction Co Ltd


001440.KS
Taihan Electric Wire Co Ltd
018250.KS
Aekyung Industrial Co Ltd




145990.KS
Samyang Corp




012630.KS
HDC Holdings Co Ltd


There are 12 trading days to implementation of the changes and there are a lot of deletions that have over 1 day of ADV to trade. The impact on the inclusions is smaller but there will be a lot of active funds looking to buy the stocks so they don't deviate too much from their benchmark.With short selling limited to the constituents of the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX), shorting the inclusions will be tough while selling/shorting the deletions is a lot easier since they are current index constituents. The inclusions could outperform the deletions till a couple of days before implementation date, while there could be a high risk/reward reverse trade if the outperformance is significant.

Hyosung Advanced Materials / Index Rebalance

AnnouncementThe KRX has just announced the results of the KOSPI 200 semi-annual rebalancing. The KRX will reflect the changes in the index calculation at the close of June 10. 5 in total newly make KOSPI 200, while 7 names leave the index.
LX Holdings (383800 KS) will be added to the index on May 28 and remain in KOSPI 200 after June 11.
SK IE Technology (361610 KS) will be added to the index on June 11 if it meets the fast-entry conditions. In such a case, HDC (012630 KS) will be deleted. KRX will officially announce it on June 2.









KOSPI 200 additions
Ticker
KOSPI 200 deletions
Ticker


Hyosung Advanced Materials Corp
298050
Tae Young Engineering&amp;Constructin Co Ltd
009410


Taihan Electric Wire Co Ltd
001440
Namsun Aluminum Co Ltd
008350


Hyosung TNC Corp
298020
Binggrae Co Ltd
005180


Dongwon Industries Co., Ltd
006040
Hanil Hyundai Cement Co Ltd
006390


SK Bioscience Co Ltd
302440
Samyang Corp
145990




SPC Samlip Co Ltd
005610




Aekyung Industrial Co Ltd
018250

Source: KRX

Passive flow estimationSK Bioscience will enjoy the largest passive inflow estimated at ₩179.8B. But Dongwon Industries will face the biggest impact as its estimated passive inflow takes 11.65 days to buy. The other 4 additions need less than 2 days to buy.








KOSPI 200 adds - passive inflow
Ticker
Estimated passive inflow
Days to buy


Hyosung Advanced Materials Corp
298050
₩40.2B
1.09x


Taihan Electric Wire Co Ltd
001440
₩29.3B
1.63x


Hyosung TNC Corp
298020
₩57.3B
0.83x


Dongwon Industries Co., Ltd
006040
₩16.9B
11.65x


SK Bioscience Co Ltd
302440
₩179.8B
1.02x

Source: KRX &amp; FnGuide

Namsun Aluminum will lose the largest passive money estimated at ₩28.3B, requiring 2.43 days to cover. But Binggrae will likely encounter the harshest impact, requiring 6.10 days to cover.








KOSPI 200 deletes - passive outflow
Ticker
Estimated passive outflow
Days to cover


Tae Young Engineering&amp;Constructin Co Ltd
009410
₩14.5B
2.54x


Namsun Aluminum Co Ltd
008350
₩28.3B
2.43x


Binggrae Co Ltd
005180
₩22.3B
6.10x


Hanil Hyundai Cement Co Ltd
006390
₩6.5B
2.67x


Samyang Corp
145990
₩7.2B
2.01x


SPC Samlip Co Ltd
005610
₩7.3B
0.46x


Aekyung Industrial Co Ltd
018250
₩20.8B
1.90x

Source: KRX &amp; FnGuide

Price performanceAll of the additions have had a decent rally as they move into the rebalancing date. Hyosung Advanced Materials had a bit of correction of late, though.The deletions have had mostly a strong performance on a year-to-date basis. But everyone had a downward correction in the recent days, probably due to the index rebalancing. Short interestI don't see a heavy short interest in any of the deletes yet. Namsun Aluminum has the highest short interest to float shares ratio at 3.33%, which is still 1.16 days to cover. But that doesn't mean that short-sellers aren't waiting on these deletes. Everyone carries a pretty heavy loan balance. As for Binggare, the loan balance is 8 times its 30-day average daily trade volume, leaving the most substantial room for new short positions. 











KOSPI 200 deletes - short interest
Ticker
Short interest to float shares
Days to cover
Loan balance to float shares
Loan balance to ADTV
30-day average daily trade value


Tae Young Engineering&amp;Constructin Co Ltd
009410
1.05%
0.44x
6.86%
2.89x
₩5.7B


Namsun Aluminum Co Ltd
008350
3.33%
1.16x
7.26%
2.53x
₩11.7B


Binggrae Co Ltd
005180
1.19%
1.26x
7.51%
8.01x
₩3.7B


Hanil Hyundai Cement Co Ltd
006390
1.08%
0.35x
8.67%
2.79x
₩2.4B


Samyang Corp
145990
1.59%
0.58x
10.47%
3.85x
₩3.6B


SPC Samlip Co Ltd
005610
0.76%
0.16x
14.46%
2.95x
₩3.4B


Aekyung Industrial Co Ltd
018250
0.84%
0.45x
5.86%
3.11x
₩4.2B

Source: KRX



KOSPI 200 Rebalancing: Changes, Passive Flow, & Trade Approach

<p>KOSPI 200 index review period, November 1 to April 30, is now completed. </p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" style="width: 723.636px;" data-sheets-value='{"1":2,"2":"KOSPI 200 Index"}'>KOSPI 200 Index</td></tr>
<tr>
<td style="width: 300.909px;" data-sheets-value='{"1":2,"2":"Ticker"}'>Ticker</td>
<td style="width: 401.818px;" data-sheets-value='{"1":2,"2":"KRX:KOSPI200"}'>KRX: KOSPI200</td>
</tr>
<tr>
<td style="width: 300.909px;" data-sheets-value='{"1":2,"2":"Rebalancing"}'>Rebalancing</td>
<td style="width: 401.818px;" data-sheets-value='{"1":2,"2":"Biannually"}'>Biannually</td>
</tr>
<tr>
<td style="width: 300.909px;" data-sheets-value='{"1":2,"2":"Effective date"}'><strong>Effective date</strong></td>
<td style="width: 401.818px;" data-sheets-value='{"1":2,"2":"June 11, 2021 - next trading day of 2nd Thursday of June &amp; December"}'><strong>June 11, 2021 - next trading day of 2nd Thursday of June &amp; December</strong></td>
</tr>
<tr>
<td style="width: 300.909px;" data-sheets-value='{"1":2,"2":"Review period"}'><strong>Review period</strong></td>
<td style="width: 401.818px;" data-sheets-value='{"1":2,"2":"November 1, 2020 to April 30, 2021"}'><strong>November 1, 2020 - April 30, 2021</strong></td>
</tr>
<tr>
<td style="width: 300.909px;" data-sheets-value='{"1":2,"2":"Est. total mirroring funds"}'>Est. total mirroring funds</td>
<td style="width: 401.818px;" data-sheets-value='{"1":3,"3":60000}' data-sheets-numberformat='{"1":2,"2":"#,##0.00","3":1}'>60,000.00</td>
</tr>
<tr>
<td style="width: 300.909px;" data-sheets-value='{"1":2,"2":"Total float-adj market cap (₩B)"}'><strong>Total float-adj market cap (₩B)</strong></td>
<td style="width: 401.818px;" data-sheets-value='{"1":3,"3":1249756.4}' data-sheets-numberformat='{"1":2,"2":"#,##0.00","3":1}'><strong>1,249,756.40</strong></td>
</tr>
<tr>
<td style="width: 300.909px;" data-sheets-value='{"1":2,"2":"- Average"}'>- Average</td>
<td style="width: 401.818px;" data-sheets-value='{"1":3,"3":6217.7}' data-sheets-numberformat='{"1":2,"2":"#,##0.00","3":1}'>6,217.70</td>
</tr>
<tr>
<td style="width: 300.909px;" data-sheets-value='{"1":2,"2":"- Highest"}'>- Highest</td>
<td style="width: 401.818px;" data-sheets-value='{"1":3,"3":384364.4}' data-sheets-numberformat='{"1":2,"2":"#,##0.00","3":1}'>384,364.40</td>
</tr>
<tr>
<td style="width: 300.909px;" data-sheets-value='{"1":2,"2":"- Lowest"}'>- Lowest</td>
<td style="width: 401.818px;" data-sheets-value='{"1":3,"3":111}'>111</td>
</tr>
<tr>
<td style="width: 300.909px;" data-sheets-value='{"1":2,"2":"- Median"}'>- Median</td>
<td style="width: 401.818px;" data-sheets-value='{"1":3,"3":1458.5}' data-sheets-numberformat='{"1":2,"2":"#,##0.00","3":1}'>1,458.50</td>
</tr>
<tr>
<td style="width: 300.909px;" data-sheets-value='{"1":2,"2":"- Top 10 largest"}'>- Top 10 largest</td>
<td style="width: 401.818px;" data-sheets-value='{"1":3,"3":0.5732}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>57.32%</td>
</tr>
<tr>
<td style="width: 300.909px;" data-sheets-value='{"1":2,"2":"Current"}'>Current</td>
<td style="width: 401.818px;" data-sheets-value='{"1":3,"3":422.36}'>422.36</td>
</tr>
<tr>
<td style="width: 300.909px;" data-sheets-value='{"1":2,"2":"52W high (January 25, 2021)"}'>52W high (January 25, 2021)</td>
<td style="width: 401.818px;" data-sheets-value='{"1":3,"3":437.3}'>437.3</td>
</tr>
<tr>
<td style="width: 300.909px;" data-sheets-value='{"1":2,"2":"52W low (May 4, 2020)"}'>52W low (May 4, 2020)</td>
<td style="width: 401.818px;" data-sheets-value='{"1":3,"3":250.6}'>250.6</td>
</tr>
<tr><td colspan="2" rowspan="1" style="width: 723.636px;" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table><p><strong>Screening rules are as follows:</strong></p><ol>
<li>Select candidates for each sector in order by the <strong>cumulative average daily market cap</strong> (the cumulative cut-off at the <strong>15th percentile</strong>). Include the first company that crosses the 15th percentile mark.</li>
<li>Exclude those whose cumulative <strong>average daily trading value </strong>is below the <strong>15th percentile</strong>. Also, exclude those new entrants whose <strong>average daily market cap ranking</strong> is above 110%.</li>
<li>If not reach a full 200 members in the first and second screenings, then <strong>re-select the current constituents whose average daily market cap ranking is within 110%</strong>.</li>
<li>Select additional names <strong>among the unselected current constituents</strong> by the <strong>average daily market cap</strong> regardless of classification.</li>
</ol>

KOSPI 200 index review period, November 1 to April 30, is now completed. 





KOSPI 200 Index

Ticker
KRX: KOSPI200


Rebalancing
Biannually


Effective date
June 11, 2021 - next trading day of 2nd Thursday of June &amp; December


Review period
November 1, 2020 - April 30, 2021


Est. total mirroring funds
60,000.00


Total float-adj market cap (₩B)
1,249,756.40


- Average
6,217.70


- Highest
384,364.40


- Lowest
111


- Median
1,458.50


- Top 10 largest
57.32%


Current
422.36


52W high (January 25, 2021)
437.3


52W low (May 4, 2020)
250.6

Source: KRX

Screening rules are as follows:
Select candidates for each sector in order by the cumulative average daily market cap (the cumulative cut-off at the 15th percentile). Include the first company that crosses the 15th percentile mark.
Exclude those whose cumulative average daily trading value is below the 15th percentile. Also, exclude those new entrants whose average daily market cap ranking is above 110%.
If not reach a full 200 members in the first and second screenings, then re-select the current constituents whose average daily market cap ranking is within 110%.
Select additional names among the unselected current constituents by the average daily market cap regardless of classification.


KOSPI 200 Review Period Completed: Early Phase Long Short Trade

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.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Hyosung TNC Co Ltd (298020 KS)

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...

Sanghyun Park

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

KOSPI200 Index Rebalance: Spot On!

There are 5 adds and 7 deletes for the KOSPI200 (as we forecast). There could be another add/delete if SK IE Tech gets index Fast Entry. Inclusions...

Brian Freitas

KOSPI 200 Rebalancing: Changes, Passive Flow, & Trade Approach

The KRX has just announced the results of the KOSPI 200 semi-annual rebalancing. This post examines the passive flow of the adds and deletes as...

Sanghyun Park

KOSPI 200 Review Period Completed: Early Phase Long Short Trade

Last Friday was the last day of the KOSPI 200 index review period. This post screens higher probable ones for addition and deletion and suggests an...

Sanghyun Park

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)