Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Douglas Research Advisory

Equity Bottom-Up

<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 1Q 2025.</li>
<li>The recent martial law cancellation and numerous impeachments of acting Presidents have raised political uncertainty in Korea resulting in widening of some gaps among numerous holdcos and opcos in Korea.</li>
<li>Of the 38 pair trades, 25 of them involved holdcos outperforming opcos in the past six months and the other 13 opcos outperforming holdcos in the same period.</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 1Q 2025.
The recent martial law cancellation and numerous impeachments of acting Presidents have raised political uncertainty in Korea resulting in widening of some gaps among numerous holdcos and opcos in Korea.
Of the 38 pair trades, 25 of them involved holdcos outperforming opcos in the past six months and the other 13 opcos outperforming holdcos in the same period.


Korean Holdcos Vs Opcos Gap Trading Opportunities in 1Q 2025

<ul>
<li>Starting January 2025, there will be a major change in the regulation regarding the use of treasury shares during a company spinoff process.</li>
<li>The main change involves the practice of allocating newly issued shares to existing treasury shares held by companies during corporate spinoffs. </li>
<li>This practice will now be banned which should help to reduce the wrongful use of treasury shares and improve minority shareholders' rights. </li>
</ul>


Starting January 2025, there will be a major change in the regulation regarding the use of treasury shares during a company spinoff process.
The main change involves the practice of allocating newly issued shares to existing treasury shares held by companies during corporate spinoffs. 
This practice will now be banned which should help to reduce the wrongful use of treasury shares and improve minority shareholders' rights. 


Change in Regulation of Treasury Shares Allocation Post Spinoffs Starting January 2025

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>The review period for the March rebalance of the KOSPI Size Indices commenced on 1 December and will end on 28 February.</li>
<li>A quarter of the way through the review period, we forecast 37 migrating stocks. Among new listings, 1 could be added to LargeCap, 3 to MidCap and 2 to SmallCap.</li>
<li>Four downward migrations were deleted from a global index in November. Now, three more downward migrations could be deleted from the same global index in February.</li>
</ul>


The review period for the March rebalance of the KOSPI Size Indices commenced on 1 December and will end on 28 February.
A quarter of the way through the review period, we forecast 37 migrating stocks. Among new listings, 1 could be added to LargeCap, 3 to MidCap and 2 to SmallCap.
Four downward migrations were deleted from a global index in November. Now, three more downward migrations could be deleted from the same global index in February.


KOSPI Size Indices: Overlap Between Global Passive Selling & Downward Migrations

<ul>
<li>In the next several days, it is likely that the Doosan Group is likely to cancel its restructuring plan involving Doosan Enerbility, Doosan Bobcat, and Doosan Robotics.</li>
<li>As a result of the sharp decline in share prices of major Doosan Group companies, the cost of appraisal rights may be too much for the Doosan Group.</li>
<li>Despite the negative impact of recent political events in Korea, a cancellation of  Doosan Group restructuring plan could have a near-term positive impact on all the major Doosan Group companies.</li>
</ul>


In the next several days, it is likely that the Doosan Group is likely to cancel its restructuring plan involving Doosan Enerbility, Doosan Bobcat, and Doosan Robotics.
As a result of the sharp decline in share prices of major Doosan Group companies, the cost of appraisal rights may be too much for the Doosan Group.
Despite the negative impact of recent political events in Korea, a cancellation of  Doosan Group restructuring plan could have a near-term positive impact on all the major Doosan Group companies.


Doosan Group Is Likely To Cancel Its Restructuring Plans

<ul>
<li>The review period for the March rebalance of the KOSPI Size Indices commences on 1 December and will end on 28 February.</li>
<li>We see 5 migrations from MidCap to LargeCap, 1 new addition to LargeCap, 8 stocks moving from SmallCap to MidCap and 1 new addition to MidCap.</li>
<li>The migrations from MidCap to LargeCap have outperformed the other migration categories. Four potential LargeCap to MidCap migrations will be deleted from a global index later this month.</li>
</ul>


The review period for the March rebalance of the KOSPI Size Indices commences on 1 December and will end on 28 February.
We see 5 migrations from MidCap to LargeCap, 1 new addition to LargeCap, 8 stocks moving from SmallCap to MidCap and 1 new addition to MidCap.
The migrations from MidCap to LargeCap have outperformed the other migration categories. Four potential LargeCap to MidCap migrations will be deleted from a global index later this month.


KOSPI Size Indices: Global Index Selling Leads to Potential Downward Migration

South Korea

Doosan Co., Ltd operates as a diversified manufacturing and service company. The Company conducts electronic components production, logistics equipment manufacturing, information technology consulting, and other businesses. Doosan provides services worldwide.

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Doosan Corp (000150 KS)

Korean Holdcos Vs Opcos Gap Trading Opportunities in 1Q 2025

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

Change in Regulation of Treasury Shares Allocation Post Spinoffs Starting January 2025

Starting January 2025, there will be a major change in the regulation regarding the use of treasury shares during a company spinoff process.

Douglas Kim

KOSPI Size Indices: Overlap Between Global Passive Selling & Downward Migrations

There could be 37 migrations for the KOSPI Size indices in March, plus 1 LargeCap and 3 MidCap inclusions. The MidCap to LargeCap migrations have...

Brian Freitas

Doosan Group Is Likely To Cancel Its Restructuring Plans

In the next several days, it is likely that the Doosan Group is likely to cancel its restructuring plan involving Doosan Enerbility, Doosan Bobcat,...

Douglas Kim

KOSPI Size Indices: Global Index Selling Leads to Potential Downward Migration

There could be 29 migrations for the KOSPI Size indices in March, plus 1 LargeCap and 1 MidCap inclusion. The MidCap to LargeCap migrations have...

Brian Freitas

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