Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Douglas Research Advisory

Equity Bottom-Up

<ul>
<li>Chinese government's efforts to ban Hanwha Ocean's five U.S. subsidiaries from conducting any transactions with organizations or individuals in China is likely to have material Negative impact on Hanwha Ocean.</li>
<li>If Hanwha’s U.S. subsidiaries are banned from Chinese suppliers, they’ll need to source alternatives (Japan, Europe, or domestic U.S. firms), that could involve 20–50% higher costs with longer lead times.</li>
<li>Basically, what's going on is that the Chinese government wants to slow down the United States' efforts to rebuild its shipbuilding sector with the help of Korean shipbuilders.</li>
</ul>


Chinese government's efforts to ban Hanwha Ocean's five U.S. subsidiaries from conducting any transactions with organizations or individuals in China is likely to have material Negative impact on Hanwha Ocean.
If Hanwha’s U.S. subsidiaries are banned from Chinese suppliers, they’ll need to source alternatives (Japan, Europe, or domestic U.S. firms), that could involve 20–50% higher costs with longer lead times.
Basically, what's going on is that the Chinese government wants to slow down the United States' efforts to rebuild its shipbuilding sector with the help of Korean shipbuilders.


Hanwha Ocean: Negative Impact from Chinese Government's Efforts to Crack Down on U.S. Subsidiaries

Event-Driven

<ul>
<li>Hanwha Impact Partners sold 1.4 trillion won worth of Hanwha Ocean shares in a block deal sale. </li>
<li>Hanwha Ocean's share price closed down at 5.4% to 112,500 won on the KRX exchange today but still 5% higher than block deal price of 107,100 won. </li>
<li>We believe that this block deal sale of 1.4 trillion won worth of Hanwha Ocean is likely to have a near-term negative impact on Hanwha Ocean's stock price.</li>
</ul>


Hanwha Impact Partners sold 1.4 trillion won worth of Hanwha Ocean shares in a block deal sale. 
Hanwha Ocean's share price closed down at 5.4% to 112,500 won on the KRX exchange today but still 5% higher than block deal price of 107,100 won. 
We believe that this block deal sale of 1.4 trillion won worth of Hanwha Ocean is likely to have a near-term negative impact on Hanwha Ocean's stock price.


A Block Deal Sale of 1.4 Trillion Won of Hanwha Ocean Shares by Hanwha Impact Partners

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

Korea Stock Exchange KOSPI 200 / Event-Driven

<ul>
<li>Since short selling was banned in November 2023, short interest has plunged in Korea as shorts were covered. Markets have not done much over the last 16 months though. </li>
<li>Foreign investor holdings have dropped from 32.05% in July to 28.57%. The top 25 stocks bought by foreign investors outperformed the top 25 stocks sold by 128% in 16 months.</li>
<li>There will be trade opportunities across indices, pref/ords, index migrations and deletions, potential market upgrades and overvalued stocks being sold.</li>
</ul>


Since short selling was banned in November 2023, short interest has plunged in Korea as shorts were covered. Markets have not done much over the last 16 months though. 
Foreign investor holdings have dropped from 32.05% in July to 28.57%. The top 25 stocks bought by foreign investors outperformed the top 25 stocks sold by 128% in 16 months.
There will be trade opportunities across indices, pref/ords, index migrations and deletions, potential market upgrades and overvalued stocks being sold.


Korea: Short Selling Is Back in March; Trade Ideas

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.

<ul>
<li>Local traders are targeting the spread between day and NXT’s after-hours, a classic arb play similar to what Japanese instos used when ATS first launched, now emerging in Korea.</li>
<li>The gap persists because institutional flow on NXT is still minimal, with recent data showing instos accounting for just 1-2% of total turnover.</li>
<li>NXT’s night session is seeing heavy retail flow, providing instos with the liquidity to trade. This creates a rare opportunity to capitalize on early inefficiencies before others catch on.</li>
</ul>


Local traders are targeting the spread between day and NXT’s after-hours, a classic arb play similar to what Japanese instos used when ATS first launched, now emerging in Korea.
The gap persists because institutional flow on NXT is still minimal, with recent data showing instos accounting for just 1-2% of total turnover.
NXT’s night session is seeing heavy retail flow, providing instos with the liquidity to trade. This creates a rare opportunity to capitalize on early inefficiencies before others catch on.


Rare Arb Opportunity from ATS Breakout in Korea: Day-Night Spread

<ul>
<li>In this insight, we discuss a pair trade between Hanwha Aerospace (012450 KS) (go long) and Hanwha Ocean (042660 KS) (go short).</li>
<li>Hanwha Ocean faces bigger overhang risk of KDB continuing to sell additional shares of the company as compared to Hanwha Aerospace's rights offering shares dilution risk. </li>
<li>Hanwha Aerospace/Hanwha Ocean price ratio (5 year period) is near the 2 standard deviation (STD) mark which could suggest a reversion to the mean.</li>
</ul>


In this insight, we discuss a pair trade between Hanwha Aerospace (012450 KS) (go long) and Hanwha Ocean (042660 KS) (go short).
Hanwha Ocean faces bigger overhang risk of KDB continuing to sell additional shares of the company as compared to Hanwha Aerospace's rights offering shares dilution risk. 
Hanwha Aerospace/Hanwha Ocean price ratio (5 year period) is near the 2 standard deviation (STD) mark which could suggest a reversion to the mean.


A Pair Trade of Hanwha Aerospace and Hanwha Ocean

South Korea

Hanwha Ocean Co., Ltd. operates as a shipbuilding and offshore company. The Company provides floating structure construction, steel wire drying, commercial vessels, specialty vessels, gas carrier, tanker, containership, ro ro, bulk carrier, submarine, warship, auxiliaries, cruise ships, and ferries manufacturing services. Hanwha Ocean also offers onshore plants services.

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Hanwha Ocean (042660 KS)

Hanwha Ocean: Negative Impact from Chinese Government's Efforts to Crack Down on U.S. Subsidiaries

Chinese government's efforts to ban Hanwha Ocean's U.S. subsidiaries from conducting any transactions with organizations or individuals in China is...

Douglas Kim

A Block Deal Sale of 1.4 Trillion Won of Hanwha Ocean Shares by Hanwha Impact Partners

The block deal sale of 1.4 trillion won worth of Hanwha Ocean by Hanwha Impact is likely to have a near-term negative impact on Hanwha Ocean's...

Douglas Kim

Korea: Short Selling Is Back in March; Trade Ideas

Short selling in Korea commences from Monday. There will be a lot of interest in shorting stocks/sectors depending on how they have performed since...

Brian Freitas

Rare Arb Opportunity from ATS Breakout in Korea: Day-Night Spread

This post highlights the rare trading opportunity created by ATS's breakout in the Korean market: the day-night price spread.

Sanghyun Park

A Pair Trade of Hanwha Aerospace and Hanwha Ocean

In this insight, we discuss a pair trade between Hanwha Aerospace (012450 KS) (go long) and Hanwha Ocean (042660 KS) (go short).

Douglas Kim

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