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>The chances of a Hanwha Corp-Hanwha Energy merger just dropped significantly. With the brothers now owning 43%, the merger's effectively off.</li>
<li>The three brothers face a KRW 200B gift tax bill and need liquidity. They’ll raise cash via Hanwha Energy’s IPO, with the youngest brother set to sell a 10% stake.</li>
<li>Hanwha Corp will likely fund its Hanwha Aerospace rights issue through a rights offering, using KRW 1.3 trillion from Hanwha Energy, after shutting down merger rumors.</li>
</ul>


The chances of a Hanwha Corp-Hanwha Energy merger just dropped significantly. With the brothers now owning 43%, the merger's effectively off.
The three brothers face a KRW 200B gift tax bill and need liquidity. They’ll raise cash via Hanwha Energy’s IPO, with the youngest brother set to sell a 10% stake.
Hanwha Corp will likely fund its Hanwha Aerospace rights issue through a rights offering, using KRW 1.3 trillion from Hanwha Energy, after shutting down merger rumors.


Hanwha's Surprise Gift Disclosure: Three Major Takeaways

Equity Capital Markets

Hanwha Corporation / Equity Capital Markets

<ul>
<li>Hanwha Corp’s chances of raising 1T KRW without a capital call are slim, likely channeling Hanwha Energy’s 1.3T KRW into Hanwha Corp intead of Hanwha Aero.</li>
<li>A shareholder-allotted rights issue from Hanwha Corp looks likely, and with short-selling resumption, it sets up a clean arbitrage play with low risk before the official announcement.</li>
<li>Timing is key—Hanwha’s using debt for now, but likely won’t delay long. Expect Hanwha Corp’s rights issue to follow Hanwha Aero’s, probably between June and July.</li>
</ul>


Hanwha Corp’s chances of raising 1T KRW without a capital call are slim, likely channeling Hanwha Energy’s 1.3T KRW into Hanwha Corp intead of Hanwha Aero.
A shareholder-allotted rights issue from Hanwha Corp looks likely, and with short-selling resumption, it sets up a clean arbitrage play with low risk before the official announcement.
Timing is key—Hanwha’s using debt for now, but likely won’t delay long. Expect Hanwha Corp’s rights issue to follow Hanwha Aero’s, probably between June and July.


The Hidden Play in Hanwha’s Noisy Stake Reshuffling: Hanwha Corp’s Rights Issue

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

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.

Quantitative Analysis

<ul>
<li>We analyzed the changes in foreign holdings of KRX stocks as of Mar 28th which has an aggregated holding worth USD490.5bn.</li>
<li>We estimate that foreign flows to be inflows of USD1,292mln. We tabulate the league table for top changes by value for 1W/4W/1Y and top stocks held by foreign institutions.</li>
<li>We highlight changes of foreign holdings in Samsung Electronics, Hanwha Aerospace, SK Hynix, Hyundai Motor, Kia.</li>
</ul>


We analyzed the changes in foreign holdings of KRX stocks as of Mar 28th which has an aggregated holding worth USD490.5bn.
We estimate that foreign flows to be inflows of USD1,292mln. We tabulate the league table for top changes by value for 1W/4W/1Y and top stocks held by foreign institutions.
We highlight changes of foreign holdings in Samsung Electronics, Hanwha Aerospace, SK Hynix, Hyundai Motor, Kia.


KRX Foreign Holding Weekly (Mar 28th): Samsung Electronics, Hanwha Aerospace, SK Hynix

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

<ul>
<li>Short selling in Korea resumes in a couple of hours. Expect heightened volatility for a few days before things settle down.</li>
<li>Foreign investors have increased their holdings over the last five weeks and there could be further buying in select stocks on stock price drops.</li>
<li>The <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">KOSPI 200 INDEX</a> has outperformed the <a href="https://www.smartkarma.com/entities/kosdaq-150-index" target="_blank" data-smartkarma-citation="entities:31077:1" rel="noopener">KOSDAQ 150 Index</a>, and the forecast index deletes have underperformed the indices indicating that there will be positioning for the short-sell resumption.</li>
</ul>


Short selling in Korea resumes in a couple of hours. Expect heightened volatility for a few days before things settle down.
Foreign investors have increased their holdings over the last five weeks and there could be further buying in select stocks on stock price drops.
The KOSPI 200 INDEX has outperformed the KOSDAQ 150 Index, and the forecast index deletes have underperformed the indices indicating that there will be positioning for the short-sell resumption.


<ul>
<li>Korea’s rights issues offer a clean arb setup—track stock rights vs. spot price, with first price as a cap, and lock in predictable entry vs. exit costs.</li>
<li>Aggressive locals skip hedging, betting the discount holds between final pricing and listing. History backs it, but it’s a case-by-case call—not a blanket recommendation.</li>
<li>Samsung SDI and Hanwha Aerospace’s KRW 5.5T raise is massive, likely flooding stock rights into the market—prime setup for arb plays.</li>
</ul>


Korea’s rights issues offer a clean arb setup—track stock rights vs. spot price, with first price as a cap, and lock in predictable entry vs. exit costs.
Aggressive locals skip hedging, betting the discount holds between final pricing and listing. History backs it, but it’s a case-by-case call—not a blanket recommendation.
Samsung SDI and Hanwha Aerospace’s KRW 5.5T raise is massive, likely flooding stock rights into the market—prime setup for arb plays.


Revisiting Korea’s Local Rights Issue Arb Setup

South Korea

Hanwha Aerospace Co., Ltd. operates as an aircraft parts manufacturing company. The Company produces and sells aircraft gas turbine engine products, aircraft compressors, low pressure turbines, and other products. Hanwha Aerospace markets its products worldwide.

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Hanwha Aerospace (012450 KS)

Hanwha's Surprise Gift Disclosure: Three Major Takeaways

This post covers 3 major takeaways from Hanwha’s surprise gift disclosure, breaking down the key implications for the company, the family’s stake...

Sanghyun Park

The Hidden Play in Hanwha’s Noisy Stake Reshuffling: Hanwha Corp’s Rights Issue

Hanwha’s shake-up—starting with Ocean’s stake shuffle and Aerospace’s rights issue—was always about locking in family control. That got sealed...

Sanghyun Park

KRX Foreign Holding Weekly (Mar 28th): Samsung Electronics, Hanwha Aerospace, SK Hynix

We analyzed KRX foreign holding data for the past week and highlighted foreign holding changes in Samsung Electronics, Hanwha Aerospace, SK Hynix,...

Ke Yan, CFA, FRM

Korea Short Selling: Off to the Races

Data indicates positioning in different types of trades ranging from index pairs to forecast index deletions and stocks with high forward PEs. Some...

Brian Freitas

Revisiting Korea’s Local Rights Issue Arb Setup

This post revisits Korea’s rights issue arb setup—fine-tuning the playbook and spotting the best angles to play the spread.

Sanghyun Park

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