Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Quantitative Analysis

<ul>
<li>In this insight, we provide the recent trends of the ETF market size growth as well as the breakdown of the best performing sector/thematic ETFs in Korea.</li>
<li>The ETFs daily transaction value as a percentage of KOSPI daily transaction value was 1.1% in 2002, which increased to 11.3% in 2012 and 31.5% in 2020.</li>
<li>The banks and dividends related ETFs have been clear winners YTD.</li>
</ul>


In this insight, we provide the recent trends of the ETF market size growth as well as the breakdown of the best performing sector/thematic ETFs in Korea.
The ETFs daily transaction value as a percentage of KOSPI daily transaction value was 1.1% in 2002, which increased to 11.3% in 2012 and 31.5% in 2020.
The banks and dividends related ETFs have been clear winners YTD.


ETF Market Growth in Korea & Breakdown of the Best Performing Sector/Thematic ETFs in Korea YTD

Bond market data and technology, BondEvalue

BondEvalue

Bond market data and technology

BondEvalue is a Singapore-based Fintech that specializes in bond market data and technology. The company's information services business offers bond market data on hard-currency corporate & sovereign bonds across Asia, Middle East, Europe and the Americas. The data, which includes bond prices, yields, news and analytics, is offered to end investors via interactive Mobile and Web Apps. Investors can sign up for a free trial of the service either via the company's website (https://bondevalue.com) or by downloading the BondEvalue Mobile App (http://onelink.to/wej7jq). BondEvalue is also developing an electronic bond exchange, BondbloX in Singapore that allows investors to trade bonds electronically in smaller sizes (US$1,000 or equivalent). For more information, visit https://www.bondblox.com/

Bond Market Data and Technology

Credit

US equities ended lower again with the S&amp;P and Nasdaq down 0.7% and and 0.6%. Barring Materials and Real Estate which were marginally in the green, all other sectors were in the red with Utilities, Communication Services and Financials falling over 1%. US 10Y Treasury yields are flat at 1.61%. European stocks were mixed with the DAX and CAC near flat while the FTSE was up 0.7%. Brazil’s Bovespa ended 0.6% lower. In the Middle East, UAE’s ADX was up 0.7% and Saudi TASI was down 0.5%. Asian markets opened lower with Shanghai, HSI and the Nikkei down 0.7%, 0.8% and 0.9% and the STI down 0.4%. EU Main CDS spreads were 1bp wider and Crossover CDS spreads widened 4.5bp. Asia ex-Japan CDS spreads widened sharply again, by 7.5bp as Chinese property developers’ bonds plummet and uncertainty on defaults loom.

5 New Deals incl. Kexim, KEB Hana; Macro; Rating Changes; New Issues; Talking Heads; Top Gainers ...

Event-Driven

<p><strong><a href="https://www.smartkarma.com/entities/woori-financial-group-inc" target="_blank" data-smartkarma-citation="entities:27995:1" rel="noopener">Woori Financial Group (316140 KS)</a> announced that it plans a full privatization of the company by the end of 2021.</strong> Currently, Woori Financial's largest shareholder is Korea Deposit Insurance Corporation (KDIC) which has a 15.1% in the company. Korean government backed KDIC plans to sell at least 10% stake in <a href="https://m.stock.naver.com/index.html#/news/ranknews/view/018/0005034309" target="_blank" rel="noopener">Woori Financial</a> by the end of 2021.</p><div class="content-highlight">
<p>One of the positives of Woori Financial after the privatization is completed is that the new controlling shareholder may try to improve various corporate governance policies in order to boost the total shareholder returns including paying higher dividends and completing higher share buyback with cancellations. </p>
<p>With the announcement of the privatization of Woori Financial Holdings by the end of 2021, an attractive long-short trading idea in the Korean financial sector would be to go long <a href="https://www.smartkarma.com/entities/woori-financial-group-inc" target="_blank" data-smartkarma-citation="entities:27995:1" rel="noopener">Woori Financial Group (316140 KS)</a> and go short <a href="https://www.smartkarma.com/entities/kakaobank-corp" target="_blank" data-smartkarma-citation="entities:33501:1" rel="noopener">KakaoBank (323410 KS)</a>.</p>
</div>

Woori Financial Group (316140 KS) announced that it plans a full privatization of the company by the end of 2021. Currently, Woori Financial's largest shareholder is Korea Deposit Insurance Corporation (KDIC) which has a 15.1% in the company. Korean government backed KDIC plans to sell at least 10% stake in Woori Financial by the end of 2021.
One of the positives of Woori Financial after the privatization is completed is that the new controlling shareholder may try to improve various corporate governance policies in order to boost the total shareholder returns including paying higher dividends and completing higher share buyback with cancellations. 
With the announcement of the privatization of Woori Financial Holdings by the end of 2021, an attractive long-short trading idea in the Korean financial sector would be to go long Woori Financial Group (316140 KS) and go short KakaoBank (323410 KS).


Privatization of Woori Financial by the End of 2021

Equity Bottom-Up

<p>In this insight, we discuss 10 different mean reversion pair trade ideas among the 6 major banks in Korea. The six major banks have had solid share price performances this year as their share prices are up on average 23.5% YTD, outperforming the market. </p><p>The overall trend among these different Korean banks' share prices (in terms of the % daily difference in the gaps of their share prices) has been consolidating.  Our data sample covers 246 trading days in the past year. </p><p>An example of the pair trade idea is between <a href="https://www.smartkarma.com/entities/kb-financial-group-inc" target="_blank" data-smartkarma-citation="entities:718:1" rel="noopener">KB Financial (105560 KS)</a> and <a href="https://www.smartkarma.com/entities/shinhan-financial-group-ltd" target="_blank" data-smartkarma-citation="entities:6978:1" rel="noopener">Shinhan Financial (055550 KS). </a>In the past year, there were four trading days when the daily change in the difference between two stocks exceeded 15% and three trading days when the daily change in the difference between two stocks exceeded -10%. In the past several weeks, the gap in the difference between two stocks has been consolidating and there does not appear to be noticeable mean reversion trading opportunity on this pair trade right now.</p><p><em>Trading idea: Look to put a mean reversion pair trade (long-short) if and when the daily change in the difference between the two stocks exceed either 15% or -10%. </em></p>

In this insight, we discuss 10 different mean reversion pair trade ideas among the 6 major banks in Korea. The six major banks have had solid share price performances this year as their share prices are up on average 23.5% YTD, outperforming the market. The overall trend among these different Korean banks' share prices (in terms of the % daily difference in the gaps of their share prices) has been consolidating.  Our data sample covers 246 trading days in the past year. An example of the pair trade idea is between KB Financial (105560 KS) and Shinhan Financial (055550 KS). In the past year, there were four trading days when the daily change in the difference between two stocks exceeded 15% and three trading days when the daily change in the difference between two stocks exceeded -10%. In the past several weeks, the gap in the difference between two stocks has been consolidating and there does not appear to be noticeable mean reversion trading opportunity on this pair trade right now.Trading idea: Look to put a mean reversion pair trade (long-short) if and when the daily change in the difference between the two stocks exceed either 15% or -10%. 

Mean Reversion Pair Trade Ideas in the Korean Banking Sector

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<div><p>Kakao Bank (KB), South Korea’s largest digital bank, raised up to US$2.2bn in its South Korean IPO. Kakao will hold a 27.26% stake post listing. The share will begin to trade on 6th Aug 2021.</p></div><div><p>Even though Kakao started operations only in July 2017, by 2020 it had already garnered more than 1% market share of overall loans and deposits in South Korea. KB’s loans have grown by 138% over 2018 to 1Q21 to reach KRW21.6tn, while its deposits have grown by 197% over the same period to reach KRW24.2tn. </p></div><div><p>Over 2018-20, its total income (Net interest income plus net fee income) grew by 216%, while it went from booking a loss in 2018 to reporting a 26% profit margin by 2020. KB’s total income was up another 60% YoY in 1Q21, while PAT was up 153% YoY.</p></div><div><p>We have covered various aspects of the deal in our previous notes, <a href="https://www.smartkarma.com/insights/kakao-bank-ipo-riding-on-parent-s-network-but-boundaries-with-kakao-pay-remain-unclear" target="_blank" rel="noopener">Kakao Bank IPO - Riding on parents network but boundaries with Kakao Pay remain unclear</a>, <a href="https://www.smartkarma.com/insights/kakao-bank-ipo-pricey-as-it-should-be" target="_blank" rel="noopener">Kakao Bank IPO - Pricey as It Should Be </a>and <a href="https://www.smartkarma.com/insights/kakao-bank-ipo-lack-of-lock-up-and-msci-ftse-index-implications" target="_blank" rel="noopener">Kakao Bank IPO - Lack of Lock-Up and MSCI, FTSE Index Implications</a>.</p></div><div><p>In this note, we will talk about the deal's trading dynamics.</p></div>

Kakao Bank (KB), South Korea’s largest digital bank, raised up to US$2.2bn in its South Korean IPO. Kakao will hold a 27.26% stake post listing. The share will begin to trade on 6th Aug 2021.Even though Kakao started operations only in July 2017, by 2020 it had already garnered more than 1% market share of overall loans and deposits in South Korea. KB’s loans have grown by 138% over 2018 to 1Q21 to reach KRW21.6tn, while its deposits have grown by 197% over the same period to reach KRW24.2tn. Over 2018-20, its total income (Net interest income plus net fee income) grew by 216%, while it went from booking a loss in 2018 to reporting a 26% profit margin by 2020. KB’s total income was up another 60% YoY in 1Q21, while PAT was up 153% YoY.We have covered various aspects of the deal in our previous notes, Kakao Bank IPO - Riding on parents network but boundaries with Kakao Pay remain unclear, Kakao Bank IPO - Pricey as It Should Be and Kakao Bank IPO - Lack of Lock-Up and MSCI, FTSE Index Implications.In this note, we will talk about the deal's trading dynamics.

Kakao Bank IPO Trading - One for Instis, Closer Look at FTSE and MSCI Inclusion. Remain Buyers

South Korea

Hana Financial Group Inc., in accordance with Financial Holding Companies Act, was established on December 1, 2005, through stock transfer with the former shareholders of its subsidiaries in order to provide management services and financing to associated companies.

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Hana Financial (086790 KS)

ETF Market Growth in Korea & Breakdown of the Best Performing Sector/Thematic ETFs in Korea YTD

In this insight, we provide the recent trends of the ETF market size growth as well as the breakdown of the best performing sector/thematic ETFs in...

Douglas Kim

5 New Deals incl. Kexim, KEB Hana; Macro; Rating Changes; New Issues; Talking Heads; Top Gainers ...

US equities ended lower again with the S&P and Nasdaq down 0.7% and and 0.6%. Barring Materials and Real Estate which were marginally in the...

BondEvalue

Privatization of Woori Financial by the End of 2021

Woori Financial Group announced it plans a full privatization of the company by the end of 2021. An attractive long-short trading idea would be to...

Douglas Kim

Mean Reversion Pair Trade Ideas in the Korean Banking Sector

In this insight, we discuss 10 different mean reversion pair trade ideas among the 6 major banks in Korea.Our data sample covers 246 trading days...

Douglas Kim

Kakao Bank IPO Trading - One for Instis, Closer Look at FTSE and MSCI Inclusion. Remain Buyers

Kakao Bank, South Korea’s largest digital bank, raised up to US$2.2bn in its South Korean IPO. Kakao will hold a 27.26% stake post listing. The...

Sumeet Singh

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