Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Event-Driven

<ul>
<li>The Korea FSC disclosed the policy agenda, which was presented to President Yoon. The implementation will likely be in the fourth quarter.</li>
<li>The FSC stated that it would grant appraisal rights to the shareholders of a parent company in an ECO (equity carve-out).</li>
<li>This rule will likely be applied to DB Hitek and Foosung. Hence, our trading setup targeting these ECO events will require more sophisticated modifications.</li>
</ul>


The Korea FSC disclosed the policy agenda, which was presented to President Yoon. The implementation will likely be in the fourth quarter.
The FSC stated that it would grant appraisal rights to the shareholders of a parent company in an ECO (equity carve-out).
This rule will likely be applied to DB Hitek and Foosung. Hence, our trading setup targeting these ECO events will require more sophisticated modifications.


Appraisal Rights (& Possibly Preemptive Too) To Be Granted in an ECO in Korea

GS Engineering & Construction / Event-Driven

<ul>
<li>Eight stocks are highly likely to migrate with a substantial passive flow. Compared to the early phase of the screening period, GS Engineering &amp; Construction newly made the list.</li>
<li>Most names should show a quite substantial passive flow (x ADTV). In particular, KCC Corp and BGF Retail deserve our special attention for their expected passive impact.</li>
<li>The flow occurs on high potential migration stocks about 20 days before the effective date. So I would start building Long/Short Basket positions with the above eight names around mid-August.</li>
</ul>


Eight stocks are highly likely to migrate with a substantial passive flow. Compared to the early phase of the screening period, GS Engineering &amp; Construction newly made the list.
Most names should show a quite substantial passive flow (x ADTV). In particular, KCC Corp and BGF Retail deserve our special attention for their expected passive impact.
The flow occurs on high potential migration stocks about 20 days before the effective date. So I would start building Long/Short Basket positions with the above eight names around mid-August.


KOSPI Size Index Series Rebalancing in September: Eight Strong Targets

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<ul>
<li>The minority shareholders of DB Hitek have started to go activist on the company. They are initially requesting the company to get access to its shareholder list.</li>
<li>Many minority shareholders are suspicious that DB Inc may be trying to intentionally lower the share price of DB Hitek through a physical division split off.</li>
<li>DB Hitek's share price has declined nearly 48% since its 52 week highs in January 2022. The valuation multiples of the company have declined to more attractive levels. </li>
</ul>


The minority shareholders of DB Hitek have started to go activist on the company. They are initially requesting the company to get access to its shareholder list.
Many minority shareholders are suspicious that DB Inc may be trying to intentionally lower the share price of DB Hitek through a physical division split off.
DB Hitek's share price has declined nearly 48% since its 52 week highs in January 2022. The valuation multiples of the company have declined to more attractive levels. 


Minority Shareholders Go Activist on DB Hitek

<ul>
<li>DB was notified of the conversion to a holding company by the Korea FTC. DB must complete the conversion to a holding company by January 1, 2024.</li>
<li>DB has no option but to ECO DB HiTek, the same trick employed for LG Energy Solution, to meet the 30% stake obligation for DB HiTek.</li>
<li>There are still opportunities for outright shorting on DB HiTek as DB will likely announce DB HiTek split before August 12.</li>
</ul>


DB was notified of the conversion to a holding company by the Korea FTC. DB must complete the conversion to a holding company by January 1, 2024.
DB has no option but to ECO DB HiTek, the same trick employed for LG Energy Solution, to meet the 30% stake obligation for DB HiTek.
There are still opportunities for outright shorting on DB HiTek as DB will likely announce DB HiTek split before August 12.


Understanding DB HiTek Shorting Event Amid DB's Holdco Conversion

<ul>
<li>We generally detect an increase in the buying volume of local institutions for stocks moving from Large Cap to Mid Cap ahead of the KOSPI size index rebalancing.</li>
<li>At the last close, Mid→Large: Pan Ocean, Hyundai Mipo, BGF Retail, &amp; OCI / Large→Mid: Hanmi Science, KCC, DB Hitek, &amp; KEPCO E&amp;C
</li>
<li>The level of price impact/correlation in the last rebalancing was exceptionally high. This is reason enough for us to consider setting up a preemptive position for this rebalancing event.</li>
</ul>


We generally detect an increase in the buying volume of local institutions for stocks moving from Large Cap to Mid Cap ahead of the KOSPI size index rebalancing.
At the last close, Mid→Large: Pan Ocean, Hyundai Mipo, BGF Retail, &amp; OCI / Large→Mid: Hanmi Science, KCC, DB Hitek, &amp; KEPCO E&amp;C

The level of price impact/correlation in the last rebalancing was exceptionally high. This is reason enough for us to consider setting up a preemptive position for this rebalancing event.


KOSPI Size Index Series: September Rebalancing Preview

South Korea

DB Hitek Co., Ltd. manufactures system semiconductor and provides foundry services. The Company's products inculde fabricated wafer and integrated circuits for mobile handsets and flat panel LCDs.

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DB Hitek Co., Ltd. (000990 KS)

Appraisal Rights (& Possibly Preemptive Too) To Be Granted in an ECO in Korea

The FSC will introduce the new rule for an ECO, which grants appraisal rights to the shareholders of a parent company, likely starting in 4Q this...

Sanghyun Park

KOSPI Size Index Series Rebalancing in September: Eight Strong Targets

This post filters eight strong targets for long/short basket trading ahead of the September KOSPI Size Index Series rebalancing.

Sanghyun Park

Minority Shareholders Go Activist on DB Hitek

The minority shareholders of DB Hitek have started to go activist on the company. They are initially requesting the company to get access to its...

Douglas Kim

Understanding DB HiTek Shorting Event Amid DB's Holdco Conversion

This post investigates the DB HiTek shorting event triggered by DB Co., Ltd.'s obligatory holdco conversion, which was officially ordered by Korea...

Sanghyun Park

KOSPI Size Index Series: September Rebalancing Preview

This post previews the upcoming rebalancing event of the KOSPI Size Index Series. Mid→Large: Pan Ocean, Hyundai Mipo, BGF Retail, & OCI /...

Sanghyun Park

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52-week Range

Market Cap (USDm)

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