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>This post dives into the official details of the Korea Value-Up Index methodology that I obtained from KRX. Plus, it has the official weights and free-float rates for each constituent.</li>
<li>The 3rd and 4th Phases led to surprising stocks entering the index, causing drops for KB and Hana, while SK Hynix benefited from the Exception Application rule.</li>
<li>The index’s straightforward methodology suggests low rebalancing uncertainty, but flexible Special Entry rules and upcoming December changes may add unpredictability, targeting bank stocks like KB, Hana, and JB.</li>
</ul>


This post dives into the official details of the Korea Value-Up Index methodology that I obtained from KRX. Plus, it has the official weights and free-float rates for each constituent.
The 3rd and 4th Phases led to surprising stocks entering the index, causing drops for KB and Hana, while SK Hynix benefited from the Exception Application rule.
The index’s straightforward methodology suggests low rebalancing uncertainty, but flexible Special Entry rules and upcoming December changes may add unpredictability, targeting bank stocks like KB, Hana, and JB.


Korea Value-Up Index: Detailed Methodology, Weights, Float Rates, & Passive Impacts Obtained

<ul>
<li>KRX faces challenges balancing the Value-Up Index as a benchmark while ensuring real disclosures, but passive inflows remain steady with local pension funds still interested.</li>
<li>KRX's potential December mini rebalancing increases uncertainty but may just lead to minor tweaks, adding KB and Hana while removing a few stocks from Communication Services.</li>
<li>The Value-Up Index resembles the KOSPI 200, using 30-40% GICS stocks and KOSDAQ 150, which may spark trading strategies focused on performance gaps within sectors.</li>
</ul>


KRX faces challenges balancing the Value-Up Index as a benchmark while ensuring real disclosures, but passive inflows remain steady with local pension funds still interested.
KRX's potential December mini rebalancing increases uncertainty but may just lead to minor tweaks, adding KB and Hana while removing a few stocks from Communication Services.
The Value-Up Index resembles the KOSPI 200, using 30-40% GICS stocks and KOSDAQ 150, which may spark trading strategies focused on performance gaps within sectors.


Lowdown from KRX's Emergency Presser on the Value-Up Index Today

Derivatives and Quantitative Strategist

Gaudenz Schneider

Equity Derivatives

Korea Stock Exchange KOSPI 200 / Equity Derivatives

<ul>
<li>
Context: The Bank of Korea will announce its rate decision on July 10, 2025. This Insight compares market and option-implied expectations with historical <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">KOSPI 200</a> reactions.</li>
<li>
Highlights: While average market reactions to BoK moves are historically muted, options are pricing in elevated volatility. Two event-driven strategies are discussed.</li>
<li>
Why Read: This Insight offers actionable, volatility-focused options strategies grounded in empirical data and current pricing—timely for traders seeking to monetize elevated volatility ahead of central bank and geopolitical events.</li>
</ul>



Context: The Bank of Korea will announce its rate decision on July 10, 2025. This Insight compares market and option-implied expectations with historical KOSPI 200 reactions.

Highlights: While average market reactions to BoK moves are historically muted, options are pricing in elevated volatility. Two event-driven strategies are discussed.

Why Read: This Insight offers actionable, volatility-focused options strategies grounded in empirical data and current pricing—timely for traders seeking to monetize elevated volatility ahead of central bank and geopolitical events.


KOSPI 200: Event-Driven Strategies into the July 10 BoK Decision

<ul>
<li>Increased exchange rate volatility affects the ADR premium, but past patterns show that exchange rate and ADR premium directions may not always align, requiring consideration of specific contextual factors.</li>
<li>If the won appreciates below the 1,300s range, overseas institutions may shift to asymmetric selling of underlying shares for foreign exchange profit, as shown by rising ADR premiums.</li>
<li>We should watch for peak conditions to capture significant ADR premiums. Trading options include borrowing underlying shares for ADR conversion, even under the current short-selling ban.</li>
</ul>


Increased exchange rate volatility affects the ADR premium, but past patterns show that exchange rate and ADR premium directions may not always align, requiring consideration of specific contextual factors.
If the won appreciates below the 1,300s range, overseas institutions may shift to asymmetric selling of underlying shares for foreign exchange profit, as shown by rising ADR premiums.
We should watch for peak conditions to capture significant ADR premiums. Trading options include borrowing underlying shares for ADR conversion, even under the current short-selling ban.


Trading Considerations for Won Appreciation & Korean ADR Premium Volatility

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Douglas Research Advisory

<ul>
<li>One of the key takeaways of the Corporate Value Up disclosures on the KIND system is that it could potentially lead to alpha generating investing opportunities. </li>
<li>Since the last week of May, there have been 7 companies that provided specific Corporate Value up programs; (4 major financials) have outperformed KOSPI.</li>
<li>Companies such as KB Financial and Shinhan Financial that provide more meaningful Corporate Value Up action plans are likely to have greater impact on their share prices. </li>
</ul>


One of the key takeaways of the Corporate Value Up disclosures on the KIND system is that it could potentially lead to alpha generating investing opportunities. 
Since the last week of May, there have been 7 companies that provided specific Corporate Value up programs; (4 major financials) have outperformed KOSPI.
Companies such as KB Financial and Shinhan Financial that provide more meaningful Corporate Value Up action plans are likely to have greater impact on their share prices. 


Alpha Generating Opportunities from the Corporate Value Up Disclosures on the KIND System

South Korea

KB Financial Group Inc. (the "Company"), in accordance with Financial Holding Companies Act, was established on September 29, 2008, through stock transfer with the former shareholders of its subsidiaries including Kookmin Bank in order to provide management services and financing to associated companies. The headquarters are located at Seoul, Korea

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KB Financial (105560 KS)

Korea Value-Up Index: Detailed Methodology, Weights, Float Rates, & Passive Impacts Obtained

This post provides the detailed methodology of the Korea Value-Up Index, which I obtained from KRX, along with the latest weights, free-float...

Sanghyun Park

Lowdown from KRX's Emergency Presser on the Value-Up Index Today

This post provides the essential details and key takeaways from KRX's emergency press event on the Value-Up Index today, highlighting...

Sanghyun Park

KOSPI 200: Event-Driven Strategies into the July 10 BoK Decision

Ahead of the Bank of Korea’s July 10 rate decision, option pricing implies larger-than-usual index moves. This Insight outlines two event-driven...

Gaudenz Schneider

Trading Considerations for Won Appreciation & Korean ADR Premium Volatility

This post explores trading angles related to the Korean won's appreciation and the increased volatility of Korean ADR premiums.

Sanghyun Park

Alpha Generating Opportunities from the Corporate Value Up Disclosures on the KIND System

After the market close on 7 August, KB Financial (105560 KS) announced that it will cancel 9.98 million treasury shares, which represents 2.5% of...

Douglas Kim

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