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

Korea Stock Exchange Kospi Index / Event-Driven

<ul>
<li>Kim Byung-hwan addressed criticism of weak incentives in tax support for the value-up policy, emphasizing boosting dividends. His background suggests effective advocacy for tax reforms in his new role.</li>
<li>He prioritized abolishing the FIIT in the National Assembly, citing its hindrance to capital market liquidity and investment promotion, indicating a robust approach to the value-up policy.</li>
<li>Kim’s appointment as FSC Chairman signals the government's commitment to advancing the value-up policy. He emphasizes boosting dividends and aligning tax policies accordingly, shaping trading strategies toward dividend-expanding companies.</li>
</ul>


Kim Byung-hwan addressed criticism of weak incentives in tax support for the value-up policy, emphasizing boosting dividends. His background suggests effective advocacy for tax reforms in his new role.
He prioritized abolishing the FIIT in the National Assembly, citing its hindrance to capital market liquidity and investment promotion, indicating a robust approach to the value-up policy.
Kim’s appointment as FSC Chairman signals the government's commitment to advancing the value-up policy. He emphasizes boosting dividends and aligning tax policies accordingly, shaping trading strategies toward dividend-expanding companies.


Impact of Kim Byung-Hwan's Appointment as Korea FSC Chairman on Value-Up Policy

<ul>
<li>Limiting extensions to four times after a 90-day repayment and mandating repayment after 12 months increases short-selling costs. The revision omits limits on position-holding cycles, disappointing retail investors.</li>
<li>Today's release did not set a timeline for short-selling resumption. The ruling party has requested it after March 2025, with key officials present suggesting next year March resumption.</li>
<li>Regarding the electronic system implementation, core content aligns with the draft, but newly revealed institution numbers add a new perspective. Uncertainties remain on integrating overseas stock borrowing into the system.</li>
</ul>


Limiting extensions to four times after a 90-day repayment and mandating repayment after 12 months increases short-selling costs. The revision omits limits on position-holding cycles, disappointing retail investors.
Today's release did not set a timeline for short-selling resumption. The ruling party has requested it after March 2025, with key officials present suggesting next year March resumption.
Regarding the electronic system implementation, core content aligns with the draft, but newly revealed institution numbers add a new perspective. Uncertainties remain on integrating overseas stock borrowing into the system.


Specifics of Korea's Official Short-Selling Regulations, Announced This Morning

<ul>
<li>Starting May 27th, KRX-listed firms can voluntarily disclose value-up details, publicly available on the website. Additionally, view five investment indicators for all KRX-listed companies below.</li>
<li>Finalized version similar to draft, with added content requested by listed companies, like R&amp;D investment growth rate. Tax incentives excluded, awaiting alignment with Ministry's plan in July.</li>
<li>KRX keeps a screening framework for the index akin to March's criteria, with ROE likely having the highest weight. Recent signals hint at increasing dividend weighting.</li>
</ul>


Starting May 27th, KRX-listed firms can voluntarily disclose value-up details, publicly available on the website. Additionally, view five investment indicators for all KRX-listed companies below.
Finalized version similar to draft, with added content requested by listed companies, like R&amp;D investment growth rate. Tax incentives excluded, awaiting alignment with Ministry's plan in July.
KRX keeps a screening framework for the index akin to March's criteria, with ROE likely having the highest weight. Recent signals hint at increasing dividend weighting.


KRX Announces Final Version of Value-Up Disclosure Guidelines Alongside Dedicated Website Launch

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>The review period for the September rebalance of the KOSPI Size Indices will run from 1 June to 31 August.</li>
<li>We see 6 migrations from MidCap to LargeCap, 1 new addition to LargeCap, 6 stocks moving from SmallCap to MidCap and 3 new additions to MidCap.</li>
<li>Stocks migrating upward have outperformed stocks migrating lower. But there are still stocks trading at a Price to Book of less than 1.</li>
</ul>


The review period for the September rebalance of the KOSPI Size Indices will run from 1 June to 31 August.
We see 6 migrations from MidCap to LargeCap, 1 new addition to LargeCap, 6 stocks moving from SmallCap to MidCap and 3 new additions to MidCap.
Stocks migrating upward have outperformed stocks migrating lower. But there are still stocks trading at a Price to Book of less than 1.


KOSPI Size Indices: Potential Migrations in September Are Moving

Index Rebalance

<ul>
<li>The <a href="https://www.smartkarma.com/entities/mirae-asset-tiger-top-10-etf" target="_blank" data-smartkarma-citation="entities:36042:1" rel="noopener">Mirae Asset Tiger Top 10 ETF (292150 KS)</a> tracks the FnGuide Top 10 Index and has an AUM of around US$1.2bn.</li>
<li>We currently forecast two potential changes at the next rebalance in June - one change is high probability while one could change depending on price moves over the next week.</li>
<li>The trade has performed well historically with positive performance till implementation followed by reversion post implementation.</li>
</ul>


The Mirae Asset Tiger Top 10 ETF (292150 KS) tracks the FnGuide Top 10 Index and has an AUM of around US$1.2bn.
We currently forecast two potential changes at the next rebalance in June - one change is high probability while one could change depending on price moves over the next week.
The trade has performed well historically with positive performance till implementation followed by reversion post implementation.


FnGuide Top10 Index Rebalance Preview: Two Changes Possible in June

South Korea

The KOSPI Index is a capitalization-weighted index of all common shares on the Korean Stock Exchanges. The Index was developed with a base value of 100 as of January 4, 1980. Note: The preferred shares are excluded in calculating the KOSPI Index from June 14, 2002. 

Korea Stock Exchange Kospi Index (KOSPI INDEX)

Korea Stock Exchange Kospi Index (KOSPI INDEX)

Impact of Kim Byung-Hwan's Appointment as Korea FSC Chairman on Value-Up Policy

This post explores how Kim Byung-hwan's appointment as the new Chairman of Korea's FSC impacts the local market's value-up policy.

Sanghyun Park

Specifics of Korea's Official Short-Selling Regulations, Announced This Morning

This post outlines the details of Korea's newly updated short selling regulations, which were officially announced this morning by the ruling party...

Sanghyun Park

KRX Announces Final Version of Value-Up Disclosure Guidelines Alongside Dedicated Website Launch

This post covers KRX's latest unveiling of the finalized value-up guidelines and the launch of the dedicated website. It also delves into KRX's...

Sanghyun Park

KOSPI Size Indices: Potential Migrations in September Are Moving

There are many changes expected for the KOSPI size indices in September. The potential upward migrations have outperformed the potential downward...

Brian Freitas

FnGuide Top10 Index Rebalance Preview: Two Changes Possible in June

There could be two changes for the FnGuide Top 10 Index in June. Historically, the adds have outperformed the deletes pre-implementation and there...

Brian Freitas