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>Aggressively curbing naked short selling may enhance flow conditions for Value-Up stocks by reducing market turnover.</li>
<li>Liquidity decline may worsen KOSDAQ's underperformance relative to KOSPI stocks due to its higher vulnerability to liquidity fluctuations.</li>
<li>We should also monitor price impact from phased short selling in the absence of intra-day naked short selling post-regulation tightening.</li>
</ul>


Aggressively curbing naked short selling may enhance flow conditions for Value-Up stocks by reducing market turnover.
Liquidity decline may worsen KOSDAQ's underperformance relative to KOSPI stocks due to its higher vulnerability to liquidity fluctuations.
We should also monitor price impact from phased short selling in the absence of intra-day naked short selling post-regulation tightening.


Trading Implications Of Intra-Day Naked Short Selling Rule Tightening in Korea

<ul>
<li>Korea's authorities aim to streamline delisting and tighten rules for smooth market funds. 71 companies (17 in KOSPI, 54 in KOSDAQ) under review, about 8 trillion won tied up.</li>
<li>It's unclear if this ties directly to the FSS chief's mention of kicking non-compliant firms of the Value-up Program. Rumors hint at FSS-FSC differences. Impact on Value-up trading seems minimal.</li>
<li>Nonetheless, we must explore stocks that may gain from expediting delisting for the 71 companies under review.</li>
</ul>


Korea's authorities aim to streamline delisting and tighten rules for smooth market funds. 71 companies (17 in KOSPI, 54 in KOSDAQ) under review, about 8 trillion won tied up.
It's unclear if this ties directly to the FSS chief's mention of kicking non-compliant firms of the Value-up Program. Rumors hint at FSS-FSC differences. Impact on Value-up trading seems minimal.
Nonetheless, we must explore stocks that may gain from expediting delisting for the 71 companies under review.


What We Need to Know About Speeding Up Delisting in Korea

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>Following the short sell ban announced on the weekend, 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</a> and <a href="https://www.smartkarma.com/entities/kosdaq-150-index" target="_blank" data-smartkarma-citation="entities:31077:1" rel="noopener">KOSDAQ 150</a> opened higher on Monday and rallied through the day.</li>
<li>A lot of the intraday gains on Monday have been given up over the next two trading days. Surprisingly, KRX data indicates that not a lot of shorts have covered.</li>
<li>Foreigners have been net cash buyers since Monday (could indicate covering of offshore borrow) while retail were big sellers on Monday.</li>
</ul>


Following the short sell ban announced on the weekend, the KOSPI 200 and KOSDAQ 150 opened higher on Monday and rallied through the day.
A lot of the intraday gains on Monday have been given up over the next two trading days. Surprisingly, KRX data indicates that not a lot of shorts have covered.
Foreigners have been net cash buyers since Monday (could indicate covering of offshore borrow) while retail were big sellers on Monday.


Korea Short Sell Ban: Not a Lot Covered on Monday; Shorts Holding On?

<ul>
<li>Fast entry is now permissible for KOSDAQ 150. Within 15 trading days post-listing, the average daily total market cap must rank among the top 30 ordinary stocks on KOSDAQ.</li>
<li>KOSDAQ 150 will also allow newly established entities in corporate spin-offs, following KOSPI 200's model. Inclusion is granted if the subsidiary ranks within KOSDAQ 150's top 160 (80%).</li>
<li>The ₩1.5T cutoff for KOSDAQ 150 fast entry suggests potential candidates nearing this threshold, like Oasis, Kurly (and maybe Kakao Entertainment).</li>
</ul>


Fast entry is now permissible for KOSDAQ 150. Within 15 trading days post-listing, the average daily total market cap must rank among the top 30 ordinary stocks on KOSDAQ.
KOSDAQ 150 will also allow newly established entities in corporate spin-offs, following KOSPI 200's model. Inclusion is granted if the subsidiary ranks within KOSDAQ 150's top 160 (80%).
The ₩1.5T cutoff for KOSDAQ 150 fast entry suggests potential candidates nearing this threshold, like Oasis, Kurly (and maybe Kakao Entertainment).


KOSDAQ 150's New Fast Entry Rule: Top 30 by Market Cap in 15 Trading Days Post-Listing

Korea Stock Exchange KOSPI 200 / Event-Driven

<ul>
<li>Korea banned all short selling in March 2020 and resumed short selling only on <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> and <a href="https://www.smartkarma.com/entities/kosdaq-150-index" target="_blank" data-smartkarma-citation="entities:31077:1" rel="noopener">KOSDAQ 150</a> index constituents in May 2021.</li>
<li>News reports indicate that there could be another short sell ban as soon as the coming week. Indications are that the ban could last 6 months.</li>
<li>There are many implications of a total short sell ban including futures backwardation, market manipulation, and no emerging to developed market promotion.</li>
</ul>


Korea banned all short selling in March 2020 and resumed short selling only on KOSPI 200 and KOSDAQ 150 index constituents in May 2021.
News reports indicate that there could be another short sell ban as soon as the coming week. Indications are that the ban could last 6 months.
There are many implications of a total short sell ban including futures backwardation, market manipulation, and no emerging to developed market promotion.


Korea Short Sell Ban: Background, Manipulation, Holdings, Flows, Short Interest, Implications

South Korea

KOSDAQ 150 Index is a base index for futures trading to hedge risks in KOSDAQ market. Base period and base index : Jan 4, 2010, 1,000p

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KOSDAQ 150 Index (KOSDQ150 INDEX EQUITY)

Trading Implications Of Intra-Day Naked Short Selling Rule Tightening in Korea

This post examines the trading implications stemming from the recent tightening of Korea's intra-day naked short selling regulations.

Sanghyun Park

What We Need to Know About Speeding Up Delisting in Korea

This post delves into the plan leaked by Korean financial authorities yesterday about speeding up the delisting procedure in Korea.

Sanghyun Park

Korea Short Sell Ban: Not a Lot Covered on Monday; Shorts Holding On?

Not a lot of shorts were covered on Monday. There could be more covering in the near term as the market drifts lower. KOSPI200 underperformed...

Brian Freitas

KOSDAQ 150's New Fast Entry Rule: Top 30 by Market Cap in 15 Trading Days Post-Listing

This post highlights the recently unveiled fast entry rule for KOSDAQ 150, mandating a top 30 market cap position within the first 15 trading days...

Sanghyun Park

Korea Short Sell Ban: Background, Manipulation, Holdings, Flows, Short Interest, Implications

Media reports indicate that there could be a temporary short sell ban in Korea. This could lead to futures backwardation, market manipulation and a...

Brian Freitas

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52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)