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

<p>The KRX confirmed that</p><ul>
<li>If SK IE Technology satisfies the requirements for an exceptional addition of newly listed large-scale companies, it replaces HDC in the upcoming June rebalancing.</li>
<li>The KRX will post the replacement on the KRX index website on June 2.</li>
</ul><p>SK IE Tech's fast entry into KOSPI 200 should be a done deal as its 10-day average daily market cap of ₩10.26T puts it at the 35th spot right behind Korean Air Lines.</p><p>The 50th spot is CJ Cheiljedang, with a 10-day average daily market cap of ₩6.85T, requiring SK IE Tech to plunge 33.23% to fall below CJ Cheiljedang.</p><h2>Free float estimation</h2><p>SK IE Tech's non-float is 73.96%. The immediate float sits at 15.04%, with an 11.00% stake residing in the institutional lockups. <strong>The KRX includes institutional voluntary lockups in the float shares for the index calculation. </strong>So, <strong>26.04%</strong> should be our index float for KOSPI 200.</p><table class="table table-striped">
<colgroup>
<col width="250">
<col width="100">
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Float estimation"}'>Float estimation</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Shares"}'>Shares</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"% of SO"}'>% of SO</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Last filed"}'>Last filed</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Release date"}'>Release date</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Major shareholder"}'>Major shareholder</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":49907592}' data-sheets-formula="=43633432+6274160">49,907,592</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.6999898678205009}' data-sheets-formula="=R[0]C[-1]/R2C6">70.00%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44327}'>11-May-21</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}'>-</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Executives"}'>Executives</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}'>0</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-formula="=R[0]C[-1]/R2C6">0.00%</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}'>-</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"ESOP"}'>ESOP</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2823956}'>2,823,956</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.03960801368999951}' data-sheets-formula="=R[0]C[-1]/R2C6">3.96%</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}'>-</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Non float"}'><strong>- Non-float</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":52731548}' data-sheets-formula="=sum(R[-3]C[0]:R[-1]C[0])"><strong>52,731,548</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.7395978815105004}' data-sheets-formula="=R[0]C[-1]/R2C6"><strong>73.96%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}'><strong>-</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}'><strong>-</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Institutional lockups - 6 months"}'>Institutional lockups - 6 months</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3020988}'>3,020,988</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.0423715291815185}' data-sheets-formula="=R[0]C[-1]/R2C6">4.24%</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44511}'>11-Nov-21</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Institutional lockups - 3 months"}'>Institutional lockups - 3 months</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2087672}'>2,087,672</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.02928110110647215}' data-sheets-formula="=R[0]C[-1]/R2C6">2.93%</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44419}'>11-Aug-21</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Institutional lockups - 1 months"}'>Institutional lockups - 1 months</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2700264}'>2,700,264</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.037873144439436325}' data-sheets-formula="=R[0]C[-1]/R2C6">3.79%</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":43993}'>11-Jun-20</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Institutional lockups - 15 days"}'>Institutional lockups - 15 days</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":35922}'>35,922</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.0005038318825690495}' data-sheets-formula="=R[0]C[-1]/R2C6">0.05%</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}'>-</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44342}'>26-May-21</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Float, excl. inst lockups"}'><strong>Float, excl. inst lockups</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":10721198}' data-sheets-formula="=R[-11]C[4]-R[-5]C[0]-sum(R[-4]C[0]:R[-1]C[0])"><strong>10,721,198</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.1503725118795036}' data-sheets-formula="=R[0]C[-1]/R2C6"><strong>15.04%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}'><strong>-</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}'><strong>-</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Float, incl. inst lockups"}'><strong>Float, incl. inst lockups</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":18566044}' data-sheets-formula="=R[-1]C[0]+sum(R[-5]C[0]:R[-2]C[0])"><strong>18,566,044</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.2604021184894996}' data-sheets-formula="=R[0]C[-1]/R2C6"><strong>26.04%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}'><strong>-</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}'><strong>-</strong></td>
</tr>
<tr><td colspan="5" rowspan="1" data-sheets-value='{"1":2,"2":"Source: KRX FIND &amp; DART"}'>Source: KRX FIND &amp; DART</td></tr>
</tbody>
</table><h2>Passive flow impact</h2><p>SK IE Tech will likely enjoy an estimated passive inflow of ₩168.5B, requiring 0.45 days to buy. On the other hand, HDC Holdings requires 1.90 days to cover an estimated passive outflow of ₩20.5B.</p><table class="table table-striped">
<colgroup>
<col width="200">
<col width="70">
<col width="70">
<col width="70">
</colgroup>
<tbody>
<tr>
<td style="width: 337.5px;" data-sheets-value='{"1":2,"2":"KOSPI 200 adds - passive inflow"}'>Passive flow impact</td>
<td style="text-align: right; width: 104.167px;" data-sheets-value='{"1":2,"2":"Ticker"}'>Ticker</td>
<td style="text-align: right; width: 115px;" data-sheets-value='{"1":2,"2":"Estimated passive inflow"}'>Estimated passive flow</td>
<td style="text-align: right; width: 105px;" data-sheets-value='{"1":2,"2":"Days to buy"}'>Days to buy/cover</td>
</tr>
<tr>
<td style="width: 337.5px;" data-sheets-value='{"1":2,"2":"SK IE Technology Co Ltd"}' data-sheets-formula='=googlefinance(R[0]C[1], "name")'>SK IE Technology Co Ltd </td>
<td style="text-align: right; width: 104.167px;" data-sheets-value='{"1":2,"2":"361610"}' data-sheets-formula='="361610"'>361610</td>
<td style="text-align: right; width: 115px;" data-sheets-value='{"1":3,"3":168.45645052857597}' data-sheets-formula="=Guide!R32C2*R[0]C[4]"><strong>+₩168.5B</strong></td>
<td style="text-align: right; width: 105px;" data-sheets-value='{"1":3,"3":0.45175219778441594}' data-sheets-formula='=R[0]C[-1]/(googlefinance(R[0]C[-2], "volumeavg")*average(index(googlefinance(R[0]C[-2], "price", today()-30, today()), 0, 2))/1000000000)'><strong>0.45x</strong></td>
</tr>
<tr>
<td style="width: 337.5px;">HDC Holdings Co Ltd</td>
<td style="text-align: right; width: 104.167px;">012630</td>
<td style="text-align: right; width: 115px;"><strong>-₩20.5B </strong></td>
<td style="text-align: right; width: 105px;"><strong>1.90x </strong></td>
</tr>
<tr><td colspan="4" style="width: 724.167px;" data-sheets-value='{"1":2,"2":"Source: KRX &amp; FnGuide"}'>Source: KRX &amp; FnGuide</td></tr>
</tbody>
</table><h2>Short interest</h2><p>HDC Holdings' short interest sits at 0.96% of the float shares, taking only 0.34 days to cover. But the market seems to be waiting to short the shares as its loan balance to float shares has risen to 10.10%, translating into 3.53 times the average daily trade value.</p><table class="table table-striped">
<colgroup>
<col width="200">
<col width="70">
<col width="70">
<col width="70">
<col width="70">
<col width="70">
<col width="70">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"KOSPI 200 deletes - short interest"}'>Short interest</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Ticker"}'>Ticker</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Short interest to float shares"}'>Short interest to float shares</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Days to cover"}'>Days to cover</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Loan balance to float shares"}'>Loan balance to float shares</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Loan balance to ADTV"}'>Loan balance to ADTV</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"30-day average daily trade value"}'>30-day average daily trade value</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"HDC Holdings Co Ltd"}' data-sheets-formula='=googlefinance(R[0]C2, "name")'>HDC Holdings Co Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"012630"}' data-sheets-formula='="012630"'>012630</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.0096}'><strong>0.96%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"0.34x"}'><strong>0.34x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.101}'><strong>10.10%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"3.53x"}'><strong>3.53x</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":10.749360631578947}' data-sheets-formula='=(googlefinance(R[0]C[-5], "volumeavg")*average(index(googlefinance(R[0]C[-5], "price", today()-30, today()), 0, 2))/1000000000)'>₩10.7B</td>
</tr>
<tr><td colspan="7" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table>

The KRX confirmed that
If SK IE Technology satisfies the requirements for an exceptional addition of newly listed large-scale companies, it replaces HDC in the upcoming June rebalancing.
The KRX will post the replacement on the KRX index website on June 2.
SK IE Tech's fast entry into KOSPI 200 should be a done deal as its 10-day average daily market cap of ₩10.26T puts it at the 35th spot right behind Korean Air Lines.The 50th spot is CJ Cheiljedang, with a 10-day average daily market cap of ₩6.85T, requiring SK IE Tech to plunge 33.23% to fall below CJ Cheiljedang.Free float estimationSK IE Tech's non-float is 73.96%. The immediate float sits at 15.04%, with an 11.00% stake residing in the institutional lockups. The KRX includes institutional voluntary lockups in the float shares for the index calculation. So, 26.04% should be our index float for KOSPI 200.









Float estimation
Shares
% of SO
Last filed
Release date


Major shareholder
49,907,592
70.00%
11-May-21
-


Executives
0
0.00%
-
-


ESOP
2,823,956
3.96%
-
-


- Non-float
52,731,548
73.96%
-
-


Institutional lockups - 6 months
3,020,988
4.24%
-
11-Nov-21


Institutional lockups - 3 months
2,087,672
2.93%
-
11-Aug-21


Institutional lockups - 1 months
2,700,264
3.79%
-
11-Jun-20


Institutional lockups - 15 days
35,922
0.05%
-
26-May-21


Float, excl. inst lockups
10,721,198
15.04%
-
-


Float, incl. inst lockups
18,566,044
26.04%
-
-

Source: KRX FIND &amp; DART

Passive flow impactSK IE Tech will likely enjoy an estimated passive inflow of ₩168.5B, requiring 0.45 days to buy. On the other hand, HDC Holdings requires 1.90 days to cover an estimated passive outflow of ₩20.5B.








Passive flow impact
Ticker
Estimated passive flow
Days to buy/cover


SK IE Technology Co Ltd 
361610
+₩168.5B
0.45x


HDC Holdings Co Ltd
012630
-₩20.5B 
1.90x 

Source: KRX &amp; FnGuide

Short interestHDC Holdings' short interest sits at 0.96% of the float shares, taking only 0.34 days to cover. But the market seems to be waiting to short the shares as its loan balance to float shares has risen to 10.10%, translating into 3.53 times the average daily trade value.











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


HDC Holdings Co Ltd
012630
0.96%
0.34x
10.10%
3.53x
₩10.7B

Source: KRX



SK IE Tech In & HDC Out Offers A Clear-Cut Long/Short Setup

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.

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<div class="content-highlight"><p>In this insight, we highlight the closing of the pricing gaps between the major Korean holdcos and opcos, especially with the upcoming end of the ban on the short selling of shares in Korea in May. In this insight, we highlight 26 pair trades that involve Korean holdcos and opcos.</p></div><p>Just a reminder that the ban on short selling of KOSPI 200 and KOSDAQ 150 included stocks will remain in place until May 2nd and investors will be able to resume their shorting on these 350 stocks starting on May 3rd. Once this ban on short selling of stocks ends, there could be more investors that may look to add to the holdco shares and short the opco shares (especially among the pairs where the holdco shares have underperformed the opco shares in the past year). However, some of these moves have already started to take place in the past few weeks, which could reduce the overall profits on the pair trades. </p><p>Traditionally, the pair trades involving Korean holdcos and opcos have been a trading strategy that many hedge funds have employed for many years. However, the ban on short selling of stocks in Korea have prevented many of these funds from employing these pair trade strategies. Once the ban ends, you will likely see these funds becoming more active in these trading methods once again. </p><div class="content-highlight">
<p>In the section below, we separated the pair trades into two different sections. The first table involves major opcos outperforming holdcos (regular and quasi) in the past year. Of the 26 pair trade strategies mentioned in this insight, this section I involves 19 of them (73% of total). The section II (which involve holdcos outperforming the opcos in the past year) involves 7 pair trade strategies (27% of total).</p>
<p>In other words, the opcos in general have vastly outperformed the holdcos in the past year, especially due to the ban on the short selling of stocks in Korea. Because the opcos tend to be the bigger company than the holdcos in terms of market cap, many fund managers (both active and passive) have tended to just invest in the opcos and pay less attention to the holdcos.  </p>
</div><p>Also, we described the holdcos as either regular or quasi. SK Telecom and Samsung C&amp;T would be examples of "quasi" holdcos whereas Orion Holdings and Hanjin Kal would be examples of regular holdcos. </p>

In this insight, we highlight the closing of the pricing gaps between the major Korean holdcos and opcos, especially with the upcoming end of the ban on the short selling of shares in Korea in May. In this insight, we highlight 26 pair trades that involve Korean holdcos and opcos.Just a reminder that the ban on short selling of KOSPI 200 and KOSDAQ 150 included stocks will remain in place until May 2nd and investors will be able to resume their shorting on these 350 stocks starting on May 3rd. Once this ban on short selling of stocks ends, there could be more investors that may look to add to the holdco shares and short the opco shares (especially among the pairs where the holdco shares have underperformed the opco shares in the past year). However, some of these moves have already started to take place in the past few weeks, which could reduce the overall profits on the pair trades. Traditionally, the pair trades involving Korean holdcos and opcos have been a trading strategy that many hedge funds have employed for many years. However, the ban on short selling of stocks in Korea have prevented many of these funds from employing these pair trade strategies. Once the ban ends, you will likely see these funds becoming more active in these trading methods once again. 
In the section below, we separated the pair trades into two different sections. The first table involves major opcos outperforming holdcos (regular and quasi) in the past year. Of the 26 pair trade strategies mentioned in this insight, this section I involves 19 of them (73% of total). The section II (which involve holdcos outperforming the opcos in the past year) involves 7 pair trade strategies (27% of total).
In other words, the opcos in general have vastly outperformed the holdcos in the past year, especially due to the ban on the short selling of stocks in Korea. Because the opcos tend to be the bigger company than the holdcos in terms of market cap, many fund managers (both active and passive) have tended to just invest in the opcos and pay less attention to the holdcos.  
Also, we described the holdcos as either regular or quasi. SK Telecom and Samsung C&amp;T would be examples of "quasi" holdcos whereas Orion Holdings and Hanjin Kal would be examples of regular holdcos. 

Closing the Gap: Korean Holdcos Vs. Opcos

Equity Bottom-Up

HDC Hyundai Development Co-Engineering & Construction / Equity Bottom-Up

HDC Hyundai Development Co-Engineering & Construction

<div class="content-highlight">
<p><strong>HDC Hyundai Development, which is one of the best apartment construction companies in Korea, is another high conviction Buy idea in Korea in 2021. HDC Hyundai Development is a deep value play. Net cash represents 65% of its market cap. The stock is trading at dirt cheap levels of 1.0x EV/EBITDA (2020). </strong></p>
<h2><strong>Three Key Catalysts</strong></h2>
<ul>
<li><strong>The replacement of the Ministry of Land, Infrastructure, &amp; Transport signals a potential big increase in new housing units in Korea </strong></li>
<li><strong>Focus back on its core construction business  </strong></li>
<li><strong>Increasing likelihood of higher dividends</strong></li>
</ul>
</div>


HDC Hyundai Development, which is one of the best apartment construction companies in Korea, is another high conviction Buy idea in Korea in 2021. HDC Hyundai Development is a deep value play. Net cash represents 65% of its market cap. The stock is trading at dirt cheap levels of 1.0x EV/EBITDA (2020). 
Three Key Catalysts

The replacement of the Ministry of Land, Infrastructure, &amp; Transport signals a potential big increase in new housing units in Korea 
Focus back on its core construction business  
Increasing likelihood of higher dividends



2021 High Conviction in Korea: HDC Hyundai Development

Equity Capital Markets

HDC Hyundai Development Co-Engineering & Construction / Equity Capital Markets

<p>About 0.7M subscription rights changed hands on Day 3. Other 0.5M rights changed hands on Day 4. So far, nearly 30% of the float offering has found new owners. Then, shorting? We had a relatively quiet day on Day 3, but yesterday, shorting almost tripled, thereby reaching 49% of the TV, which is exceptionally high even by Korea's local standard.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/119/997/original/11.png?1582670634" class="editor-image img-responsive" data-smartkarma-image-id="119997"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/119/998/original/12.png?1582670641" class="editor-image img-responsive" data-smartkarma-image-id="119998"></figure>

About 0.7M subscription rights changed hands on Day 3. Other 0.5M rights changed hands on Day 4. So far, nearly 30% of the float offering has found new owners. Then, shorting? We had a relatively quiet day on Day 3, but yesterday, shorting almost tripled, thereby reaching 49% of the TV, which is exceptionally high even by Korea's local standard.

HDC-OP Rights Offer: Heavy Shorting on Day 4 at 49% of TV

South Korea

HDC Holdings Co.,Ltd operates as a real estate owner and developer. The Company develops residential areas, office buildings, hotels, restaurants, and other related areas. HDC Holdings offers services throughout South Korea.

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HDC Holdings (012630 KS)

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