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>LG Energy has the second-largest market cap on KOSPI. For Fast Entry to fail, the price must lose 90% of its current value. So, Fast Entry is a foregone conclusion. </li>
<li>
The review period ends on February 21. The implementation date is March 11, and the announcement will likely be made public around February 24-25.</li>
<li>The stock with the lowest market cap from May to October last year will leave the Index. The victim is Dongwon F&amp;B, beating Nexen Tire by a very narrow margin. 
</li>
</ul>


LG Energy has the second-largest market cap on KOSPI. For Fast Entry to fail, the price must lose 90% of its current value. So, Fast Entry is a foregone conclusion. 

The review period ends on February 21. The implementation date is March 11, and the announcement will likely be made public around February 24-25.
The stock with the lowest market cap from May to October last year will leave the Index. The victim is Dongwon F&amp;B, beating Nexen Tire by a very narrow margin. 



Clearing up Misunderstandings About LG Energy K200 Fast Entry & Likely Deletion Stock

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

<ul>
<li>The review period for the June rebalance 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">KOSPI2 INDEX</a> ends 30 April. The KRX will announce the changes in May with implementation at the close on 9 June.</li>
<li>
<a href="https://www.smartkarma.com/entities/lg-energy-solution" target="_blank" data-smartkarma-citation="entities:33464:1" rel="noopener">LG Energy Solution (LGENERGY KS)</a> could get Fast Entry to the KOSPI200 Index in March. <a href="https://www.smartkarma.com/entities/hyundai-engineering-co-ltd" target="_blank" data-smartkarma-citation="entities:33008:1" rel="noopener">Hyundai Engineering Co Ltd (HEC KS)</a> needs a price jump to get Fast Entry.</li>
<li>We see 6 potential changes to the KOSPI200 in June; most of these are high probability. The potential adds are already outperforming the potential deletes - there should be more.</li>
</ul>


The review period for the June rebalance of the KOSPI2 INDEX ends 30 April. The KRX will announce the changes in May with implementation at the close on 9 June.

LG Energy Solution (LGENERGY KS) could get Fast Entry to the KOSPI200 Index in March. Hyundai Engineering Co Ltd (HEC KS) needs a price jump to get Fast Entry.
We see 6 potential changes to the KOSPI200 in June; most of these are high probability. The potential adds are already outperforming the potential deletes - there should be more.


KOSPI200 June Index Rebalance Preview: High Probability Adds/Deletes

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

In this insight, we discuss the stocks that could get included or excluded in the November 2021 KOSPI 200 rebalance. We highlight 15 stocks that could get included and 10 stocks that could get excluded in the upcoming KOSPI 200 rebalance.<div class="content-highlight">
This rebalance of the KOSPI 200 strategy is a type of momentum-driven strategy. The 15 stocks that we think could get included in the next KOSPI 200 rebalance have generated strong share price performances (up 55% on average in the past six months). 
On the other hand, the 10 stocks which we think could get excluded in the next KOSPI 200 rebalance (the bottom 5% of KOSPI 200 index in terms of market cap) have done much worse in terms of their share price performance (down 6.1% on average in the past six months). 
</div>

In this insight, we discuss the stocks that could get included or excluded in the November 2021 KOSPI 200 rebalance. We highlight 15 stocks that could get included and 10 stocks that could get excluded in the upcoming KOSPI 200 rebalance.
This rebalance of the KOSPI 200 strategy is a type of momentum-driven strategy. The 15 stocks that we think could get included in the next KOSPI 200 rebalance have generated strong share price performances (up 55% on average in the past six months). 
On the other hand, the 10 stocks which we think could get excluded in the next KOSPI 200 rebalance (the bottom 5% of KOSPI 200 index in terms of market cap) have done much worse in terms of their share price performance (down 6.1% on average in the past six months). 


Potential Changes of KOSPI 200 Index Components in the November 2021 Rebalance

There could be two changes 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> at the September index futures expiry with <a href="https://www.smartkarma.com/entities/kakaobank-corp" target="_blank" data-smartkarma-citation="entities:33501:1" rel="noopener">KakaoBank (1349010D KS)</a> and <a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960 KS)</a> getting Fast Entry and replacing <a href="https://www.smartkarma.com/entities/lock-lock-co-ltd" target="_blank" data-smartkarma-citation="entities:4739:1" rel="noopener">Lock&amp;Lock (115390 KS)</a> and <a href="https://www.smartkarma.com/entities/jw-pharmaceutical-corp" target="_blank" data-smartkarma-citation="entities:18784:1" rel="noopener">Jw Pharmaceutical (001060 KS)</a> at the close of trading on 9 September.Then, the Korea Exchange (KRX) will announce the results of the December 2021 review 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> in November. The constituent changes will be effective after the close of trading on 9 December.We see 5 potential changes at the December rebalance with <a href="https://www.smartkarma.com/entities/f-f-co-ltd-new" target="_blank" data-smartkarma-citation="entities:33479:1" rel="noopener">F&amp;F (383220 KS)</a>, <a href="https://www.smartkarma.com/entities/sl-corp" target="_blank" data-smartkarma-citation="entities:20694:1" rel="noopener">SL Corp (005850 KS)</a>, <a href="https://www.smartkarma.com/entities/geneone-life-science-inc" target="_blank" data-smartkarma-citation="entities:6549:1" rel="noopener">GeneOne Life Science Inc. (011000 KS)</a>, <a href="https://www.smartkarma.com/entities/myoung-shin-industrial-co-ltd" target="_blank" data-smartkarma-citation="entities:29698:1" rel="noopener">Myoung Shin Industrial Co.,Ltd (009900 KS)</a> and <a href="https://www.smartkarma.com/entities/hyosung-chemical-corp" target="_blank" data-smartkarma-citation="entities:27752:1" rel="noopener">Hyosung Chemical Corp (298000 KS)</a> replacing <a href="https://www.smartkarma.com/entities/f-f-co-ltd" target="_blank" data-smartkarma-citation="entities:15983:1" rel="noopener">F&amp;F Co Ltd (007700 KS)</a>, <a href="https://www.smartkarma.com/entities/samyang-foods-co-ltd" target="_blank" data-smartkarma-citation="entities:9100:1" rel="noopener">Samyang Foods (003230 KS)</a>, <a href="https://www.smartkarma.com/entities/ilyang-pharmaceutical-co-ltd" target="_blank" data-smartkarma-citation="entities:2789:1" rel="noopener">Ilyang Pharmaceutical Co., (007570 KS)</a>, <a href="https://www.smartkarma.com/entities/lx-holdings" target="_blank" data-smartkarma-citation="entities:33384:1" rel="noopener">LX Holdings (383800 KS)</a> and <a href="https://www.smartkarma.com/entities/dongwon-f-b-co-ltd" target="_blank" data-smartkarma-citation="entities:3274:1" rel="noopener">Dongwon F&amp;B (049770 KS)</a>.The potential inclusions have been outperforming the potential exclusions and this could continue as short selling is only permitted on index constituents and as active funds position for the rebalance following excellent returns at the June rebalance.

There could be two changes to the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the September index futures expiry with KakaoBank (1349010D KS) and  Krafton Inc (259960 KS) getting Fast Entry and replacing Lock&amp;Lock (115390 KS) and Jw Pharmaceutical (001060 KS) at the close of trading on 9 September.Then, the Korea Exchange (KRX) will announce the results of the December 2021 review of the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) in November. The constituent changes will be effective after the close of trading on 9 December.We see 5 potential changes at the December rebalance with F&amp;F (383220 KS), SL Corp (005850 KS), GeneOne Life Science Inc. (011000 KS), Myoung Shin Industrial Co.,Ltd (009900 KS) and Hyosung Chemical Corp (298000 KS) replacing F&amp;F Co Ltd (007700 KS), Samyang Foods (003230 KS), Ilyang Pharmaceutical Co., (007570 KS), LX Holdings (383800 KS) and Dongwon F&amp;B (049770 KS).The potential inclusions have been outperforming the potential exclusions and this could continue as short selling is only permitted on index constituents and as active funds position for the rebalance following excellent returns at the June rebalance.

KOSPI200 Index Rebalance Preview: Two Changes in September; Five in December

<div class="content-highlight">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.</div>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. <div class="content-highlight">
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.  
</div>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.

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

South Korea

Cuckoo Holdings Co.,Ltd manufactures and distributes electric home appliances. The Company produces electronic pressure cookers, humidifiers, vacuum cleaners, and air purifiers. Cuckoo Holdings markets its products throughout South Korea.

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Cuckoo Holdings (192400 KS)

Clearing up Misunderstandings About LG Energy K200 Fast Entry & Likely Deletion Stock

There seem to be misunderstandings and confusion about LG Energy's KOSPI 200 Fast Entry. This post seeks to correct these misunderstandings.

Sanghyun Park

KOSPI200 June Index Rebalance Preview: High Probability Adds/Deletes

There could be 2 changes to the KOSPI200 in March & then another 6 in June. Historically, the adds outperform the deletes and the first couple of...

Brian Freitas

Potential Changes of KOSPI 200 Index Components in the November 2021 Rebalance

In this insight, we discuss stocks that could get included or excluded in the November 2021 KOSPI 200 rebalance. We highlight 15 stocks that could...

Douglas Kim

KOSPI200 Index Rebalance Preview: Two Changes in September; Five in December

We see 2 potential Fast Entry changes in September & then 5 more changes at the December rebalance. The adds are outperforming the deletes and the...

Brian Freitas

Closing the Gap: Korean Holdcos Vs. Opcos

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...

Douglas Kim

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