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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

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.There could be a change at the September futures expiry with <a href="https://www.smartkarma.com/entities/sd-biosensor-inc" target="_blank" data-smartkarma-citation="entities:33333:1" rel="noopener">SD Biosensor (SDBIOZ KS)</a> getting Fast Entry into the index. We see <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> as a potential deletion to make way for <a href="https://www.smartkarma.com/entities/sd-biosensor-inc" target="_blank" data-smartkarma-citation="entities:33333:1" rel="noopener">SD Biosensor (SDBIOZ KS)</a>. At the current time, we see 3 potential changes at the regular review in December with F&amp;F Co (383220 KS), <a href="https://www.smartkarma.com/entities/sl-corp" target="_blank" data-smartkarma-citation="entities:20694:1" rel="noopener">Sl Corp (005850 KS)</a> and <a href="https://www.smartkarma.com/entities/seah-besteel-corp" target="_blank" data-smartkarma-citation="entities:11760:1" rel="noopener">Seah Besteel (001430 KS)</a> replacing <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/f-f-co-ltd" target="_blank" data-smartkarma-citation="entities:15983:1" rel="noopener">F&amp;F Co Ltd (007700 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>. These names could change over the next few months and their prices (and the prices of the other stocks) move around.After the 100%+ returns in 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> June review by buying the inclusions and selling the exclusions (or the KOSPI2 index futures), there will be a lot of interest in the December review.In this Insight we look at the KOSPI 200 index methodology, the historical performance of inclusions vs exclusions, at potential candidates for inclusion/exclusion in this review and some of the details around the names.

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.There could be a change at the September futures expiry with SD Biosensor (SDBIOZ KS) getting Fast Entry into the index. We see Lock&amp;Lock (115390 KS) as a potential deletion to make way for SD Biosensor (SDBIOZ KS). At the current time, we see 3 potential changes at the regular review in December with F&amp;F Co (383220 KS), Sl Corp (005850 KS) and Seah Besteel (001430 KS) replacing Samyang Foods (003230 KS), F&amp;F Co Ltd (007700 KS) and Jw Pharmaceutical (001060 KS). These names could change over the next few months and their prices (and the prices of the other stocks) move around.After the 100%+ returns in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) June review by buying the inclusions and selling the exclusions (or the KOSPI2 index futures), there will be a lot of interest in the December review.In this Insight we look at the KOSPI 200 index methodology, the historical performance of inclusions vs exclusions, at potential candidates for inclusion/exclusion in this review and some of the details around the names.

KOSPI200 Index Rebalance Preview: Focus Shifts to December After a Fantastic June Review

Quantitative Analysis

<div>The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.</div><div>Hong Kong saw shorts rise on <a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a>, <a href="https://www.smartkarma.com/entities/beijing-kuaishou-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Kuaishou Technology (1024 HK)</a>, <a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</a>, <a href="https://www.smartkarma.com/entities/china-merchants-bank-co-ltd-3388a037-4214-4997-b45d-520518cfdb57" target="_blank" data-smartkarma-citation="entities:10987:1" rel="noopener">China Merchants Bank H (3968 HK)</a> and <a href="https://www.smartkarma.com/entities/lenovo-group-ltd" target="_blank" data-smartkarma-citation="entities:13359:1" rel="noopener">Lenovo (992 HK)</a> while there was short covering on <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>, <a href="https://www.smartkarma.com/entities/netease" target="_blank" data-smartkarma-citation="entities:29030:1" rel="noopener">NetEase (9999 HK)</a>, <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>, <a href="https://www.smartkarma.com/entities/aia-group-ltd" target="_blank" data-smartkarma-citation="entities:14895:1" rel="noopener">AIA Group Ltd (1299 HK)</a> and <a href="https://www.smartkarma.com/entities/galaxy-entertainment-group-limited" target="_blank" data-smartkarma-citation="entities:806:1" rel="noopener">Galaxy Entertainment Group (27 HK)</a>. Shorts increased on Financials, Information Technology and Real Estate, while decreasing on Communication Services, Consumer Discretionary and Health Care.</div><div>In Japan, stocks that saw the most shorts were <a href="https://www.smartkarma.com/entities/pan-pacific-international-holdings-corporation" target="_blank" data-smartkarma-citation="entities:13475:1" rel="noopener">Pan Pacific International Holdings (7532 JP)</a>, <a href="https://www.smartkarma.com/entities/sharp-corp" target="_blank" data-smartkarma-citation="entities:391:1" rel="noopener">Sharp Corp (6753 JP)</a>, <a href="https://www.smartkarma.com/entities/resona-holdings-inc" target="_blank" data-smartkarma-citation="entities:6841:1" rel="noopener">Resona Holdings (8308 JP)</a> and <a href="https://www.smartkarma.com/entities/toyo-tire-corporation" target="_blank" data-smartkarma-citation="entities:15064:1" rel="noopener">Toyo Tire Corporation (5105 JP)</a> while shorts decreased on <a href="https://www.smartkarma.com/entities/itochu-corp" target="_blank" data-smartkarma-citation="entities:18448:1" rel="noopener">Itochu Corp (8001 JP)</a>, <a href="https://www.smartkarma.com/entities/casio-computer-co-ltd" target="_blank" data-smartkarma-citation="entities:18338:1" rel="noopener">Casio Computer (6952 JP)</a>, <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a> and <a href="https://www.smartkarma.com/entities/monex-group-inc" target="_blank" data-smartkarma-citation="entities:14211:1" rel="noopener">Monex Group Inc (8698 JP)</a>. Sectorally, shorts increased marginally in Consumer Discretionary, Financials and Materials, and decreased in Industrials.</div><div>In Korea, short increased on <a href="https://www.smartkarma.com/entities/hyundai-motor-co" target="_blank" data-smartkarma-citation="entities:155:1" rel="noopener">Hyundai Motor Co (005380 KS)</a>, <a href="https://www.smartkarma.com/entities/celltrion-inc" target="_blank" data-smartkarma-citation="entities:991:1" rel="noopener">Celltrion Inc (068270 KS)</a> and <a href="https://www.smartkarma.com/entities/hanmi-pharm-co-ltd" target="_blank" data-smartkarma-citation="entities:12476:1" rel="noopener">Hanmi Pharm (128940 KS)</a> while shorts decreased on <a href="https://www.smartkarma.com/entities/samsung-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:191:1" rel="noopener">Samsung Electronics (005930 KS)</a>, <a href="https://www.smartkarma.com/entities/sk-hynix-inc" target="_blank" data-smartkarma-citation="entities:16955:1" rel="noopener">SK Hynix (000660 KS)</a>, <a href="https://www.smartkarma.com/entities/naver-corp" target="_blank" data-smartkarma-citation="entities:16029:1" rel="noopener">Naver Corp (035420 KS)</a> and <a href="https://www.smartkarma.com/entities/hana-tour-service-inc" target="_blank" data-smartkarma-citation="entities:4852:1" rel="noopener">Hana Tour Service (039130 KS)</a>. </div><div>Stocks in Taiwan that saw the highest increase in shorts were <a href="https://www.smartkarma.com/entities/pegatron-corp" target="_blank" data-smartkarma-citation="entities:12852:1" rel="noopener">Pegatron Corp (4938 TT)</a>, <a href="https://www.smartkarma.com/entities/yageo-corporation" target="_blank" data-smartkarma-citation="entities:13212:1" rel="noopener">Yageo Corporation (2327 TT)</a>, <a href="https://www.smartkarma.com/entities/largan-precision-co-ltd" target="_blank" data-smartkarma-citation="entities:9126:1" rel="noopener">Largan Precision (3008 TT)</a> and <a href="https://www.smartkarma.com/entities/united-microelectronics-corp" target="_blank" data-smartkarma-citation="entities:6450:1" rel="noopener">United Microelectronics Corp (2303 TT)</a> while shorts were covered on <a href="https://www.smartkarma.com/entities/unimicron-technology-corp" target="_blank" data-smartkarma-citation="entities:18778:1" rel="noopener">Unimicron Technology (3037 TT)</a>, <a href="https://www.smartkarma.com/entities/taiwan-semiconductor-manufacturing-company" target="_blank" data-smartkarma-citation="entities:11230:1" rel="noopener">TSMC (2330 TT)</a>, <a href="https://www.smartkarma.com/entities/alchip-technologies-ltd" target="_blank" data-smartkarma-citation="entities:20219:1" rel="noopener">Alchip Technologies (3661 TT)</a> and <a href="https://www.smartkarma.com/entities/winbond-electronics-corp" target="_blank" data-smartkarma-citation="entities:9177:1" rel="noopener">Winbond Electronics (2344 TT)</a>.</div>

The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.Hong Kong saw shorts rise on Ping An Insurance (H) (2318 HK), Kuaishou Technology (1024 HK), BYD (1211 HK), China Merchants Bank H (3968 HK) and Lenovo (992 HK) while there was short covering on Tencent Holdings (700 HK), NetEase (9999 HK), Meituan (3690 HK), AIA Group Ltd (1299 HK) and Galaxy Entertainment Group (27 HK). Shorts increased on Financials, Information Technology and Real Estate, while decreasing on Communication Services, Consumer Discretionary and Health Care.In Japan, stocks that saw the most shorts were Pan Pacific International Holdings (7532 JP), Sharp Corp (6753 JP), Resona Holdings (8308 JP) and Toyo Tire Corporation (5105 JP) while shorts decreased on Itochu Corp (8001 JP), Casio Computer (6952 JP), Toshiba Corp (6502 JP) and Monex Group Inc (8698 JP). Sectorally, shorts increased marginally in Consumer Discretionary, Financials and Materials, and decreased in Industrials.In Korea, short increased on Hyundai Motor Co (005380 KS), Celltrion Inc (068270 KS) and Hanmi Pharm (128940 KS) while shorts decreased on Samsung Electronics (005930 KS), SK Hynix (000660 KS), Naver Corp (035420 KS) and Hana Tour Service (039130 KS). Stocks in Taiwan that saw the highest increase in shorts were Pegatron Corp (4938 TT), Yageo Corporation (2327 TT), Largan Precision (3008 TT) and United Microelectronics Corp (2303 TT) while shorts were covered on Unimicron Technology (3037 TT), TSMC (2330 TT), Alchip Technologies (3661 TT) and Winbond Electronics (2344 TT).

Asia Short Interest: Kuaishou, BYD, Galaxy, Sharp, Resona, Toshiba, Celltrion, Naver, Pegatron, TSMC

CEO, A. Stotz Investment Research

Dr. Andrew Stotz, CFA

Quantamental Investing to beat Benchmarks

A. Stotz Investment Research

We pick stocks. We construct portfolios. All our effort is focused on how to better pick stocks and construct portfolios. We serve fund management companies, family offices, and high net worth individuals.

Equity Bottom-Up

<ul><li>High earnings quality and solid long-term earnings growth relative to its sector</li><li>Continued growth in international travel to support further profit growth in 2018, outbound travelers up by 19% YoY in 2017 and operating profit for outbound segment grew by 55% YoY in 2017</li><li>Duty-free business should see narrowed loss following the opening of new shop at Incheon Airport Terminal 2. The recently opened Terminal 2 has recorded about 30% higher sales on average compared to Terminal 1</li><li>Trades above Asian sector at 18CE* 5.9x PB, offers almost double the sector ROE and has about 18% of market cap in cash</li><li>Risks: High non-operating expenses related to the duty-free business</li></ul>* Consensus Estimates

High earnings quality and solid long-term earnings growth relative to its sectorContinued growth in international travel to support further profit growth in 2018, outbound travelers up by 19% YoY in 2017 and operating profit for outbound segment grew by 55% YoY in 2017Duty-free business should see narrowed loss following the opening of new shop at Incheon Airport Terminal 2. The recently opened Terminal 2 has recorded about 30% higher sales on average compared to Terminal 1Trades above Asian sector at 18CE* 5.9x PB, offers almost double the sector ROE and has about 18% of market cap in cashRisks: High non-operating expenses related to the duty-free business* Consensus Estimates

Hanatour (039130 KS): Cash-Loaded Korean Tour Operator

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Duty free shop is a big business in Korea. We estimate duty free shops sales in Korea to increase 24% YoY to 11.4 trillion won in 2016. The Korean government is planning to grant four more licenses by end of this year to operate duty free shops in Seoul. As a result of the Jung Woon Ho scandal involving <a href="https://www.smartkarma.com/entities/22725" target="_blank" data-smartkarma-citation="entities:22725">Hotel Lotte Co Ltd</a> , we believe the chances of <a href="https://www.smartkarma.com/entities/22725" target="_blank" data-smartkarma-citation="entities:22725">Hotel Lotte Co Ltd</a> receiving another license for a duty free shop in Seoul has been reduced significantly. It is expected that more than 10…

Duty free shop is a big business in Korea. We estimate duty free shops sales in Korea to increase 24% YoY to 11.4 trillion won in 2016. The Korean government is planning to grant four more licenses by end of this year to operate duty free shops in Seoul. As a result of the Jung Woon Ho scandal involving Hotel Lotte Co Ltd , we believe the chances of Hotel Lotte Co Ltd receiving another license for a duty free shop in Seoul has been reduced significantly. It is expected that more than 10…

Who Is Most Likely to Win a License for Duty Free Shop in Seoul?

Equity Capital Markets

<a href="https://www.smartkarma.com/entities/22725" target="_blank" data-smartkarma-citation="entities:22725">Hotel Lotte Co Ltd</a> is expected to be the biggest IPO in the world in 1H 2016. <a href="https://www.smartkarma.com/entities/22725" target="_blank" data-smartkarma-citation="entities:22725">Hotel Lotte Co Ltd</a> is the crown jewel of the Lotte Groupand is the de facto holding company of the Lotte Group affiliates. <a href="https://www.smartkarma.com/entities/22725" target="_blank" data-smartkarma-citation="entities:22725">Hotel Lotte Co Ltd</a> also has the dominant market share for duty free shop business in Korea, second largest amusement park market share (based on 2010 to 2014 cumulative attendees) in Korea, top class hotels as well resorts &amp; golf businesses. <a href="https://www.smartkarma.com/entities/22725" target="_blank" data-smartkarma-citation="entities:22725">Hotel Lotte Co Ltd</a> IPO is expected to be completed towards end of June and the shares are expected to trade at this time. <a href="https://www.smartkarma.com/entities/22725" target="_blank" data-smartkarma-citation="entities:22725">Hotel Lotte Co Ltd</a> is a mammoth company that generates significant amounts of cash. It does not need to be a publicly listed company. Nonetheless, we believe the following are the major reasons why <a href="https://www.smartkarma.com/entities/22725" target="_blank" data-smartkarma-citation="entities:22725">Hotel Lotte Co Ltd</a> is proceeding along with the IPO:<ul><li>Improve corporate transparency and image to the global community</li><li>Increase M&amp;A of duty free shops, hotels, and high-end overseas luxury brands</li><li>Reduce debt </li></ul>This is part I of our three parts reports on <a href="https://www.smartkarma.com/entities/22725" target="_blank" data-smartkarma-citation="entities:22725">Hotel Lotte Co Ltd</a> IPO. The focus of this report is on detailed analysis of the duty free sector. Korea is the largest duty free market in the world and <a href="https://www.smartkarma.com/entities/22725" target="_blank" data-smartkarma-citation="entities:22725">Hotel Lotte Co Ltd</a> has the dominant market share in the duty free sector in Korea. It generated 85% of sales and 84% of EBITDA from duty free business in 2015. Parts II and III of our reports focus on the valuation and quality of the company's cash flow and earnings.

Hotel Lotte Co Ltd is expected to be the biggest IPO in the world in 1H 2016. Hotel Lotte Co Ltd is the crown jewel of the Lotte Groupand is the de facto holding company of the Lotte Group affiliates. Hotel Lotte Co Ltd also has the dominant market share for duty free shop business in Korea, second largest amusement park market share (based on 2010 to 2014 cumulative attendees) in Korea, top class hotels as well resorts &amp; golf businesses. Hotel Lotte Co Ltd IPO is expected to be completed towards end of June and the shares are expected to trade at this time. Hotel Lotte Co Ltd is a mammoth company that generates significant amounts of cash. It does not need to be a publicly listed company. Nonetheless, we believe the following are the major reasons why Hotel Lotte Co Ltd is proceeding along with the IPO:Improve corporate transparency and image to the global communityIncrease M&amp;A of duty free shops, hotels, and high-end overseas luxury brandsReduce debt This is part I of our three parts reports on Hotel Lotte Co Ltd IPO. The focus of this report is on detailed analysis of the duty free sector. Korea is the largest duty free market in the world and Hotel Lotte Co Ltd has the dominant market share in the duty free sector in Korea. It generated 85% of sales and 84% of EBITDA from duty free business in 2015. Parts II and III of our reports focus on the valuation and quality of the company's cash flow and earnings. 

Hotel Lotte - World's Largest IPO in 1H 2016 (Part I)

South Korea

Hana Tour Service Inc. wholesales a variety of travel related services.  The Company provides outbound, inbound and domestic travel packages and cooperates with credit card companies and Internet shopping malls to market its services. Hana Tour Service also works as general sales agency (GSA) of overseas cruise and rail passes.

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Hana Tour Service (039130 KS)

KOSPI200 Index Rebalance Preview: Focus Shifts to December After a Fantastic June Review

We see 1 potential change in September and 3 potential changes at the KOSPI200 December review. Post the excellent returns at the June rebalance,...

Brian Freitas

Asia Short Interest: Kuaishou, BYD, Galaxy, Sharp, Resona, Toshiba, Celltrion, Naver, Pegatron, TSMC

The Insight looks at large short interest movements across HK, Japan, Korea and Taiwan stocks and highlights large increases/decreases in shorts to...

Brian Freitas

Hanatour (039130 KS): Cash-Loaded Korean Tour Operator

High earnings quality and solid long-term earnings growth relative to its sector Continued growth in international travel to support further...

A. Stotz Investment Research

Who Is Most Likely to Win a License for Duty Free Shop in Seoul?

Duty free shop is a big business in Korea. We estimate duty free shops sales in Korea to increase 24% YoY to 11.4 trillion won in 2016. The Korean...

Douglas Kim

Hotel Lotte - World's Largest IPO in 1H 2016 (Part I)

Hotel Lotte Co Ltd is expected to be the biggest IPO in the world in 1H 2016. Hotel Lotte Co Ltd is the crown jewel of the Lotte Groupand is the de...

Douglas Kim

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