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 main confusion is about the FSS's authority. According to the Capital Markets Act, they can’t approve capital raises but can request corrections for investor protection.</li>
<li>The FSS can issue unlimited correction requests, potentially stalling a capital raise indefinitely, which effectively pulls the plug on the entire deal.</li>
<li>Kum Yang's one is valid today; if no new correction requests arise, the capital increase proceeds. Korea Zinc faces a likely request on the 14th, causing a 2-week delay.</li>
</ul>


The main confusion is about the FSS's authority. According to the Capital Markets Act, they can’t approve capital raises but can request corrections for investor protection.
The FSS can issue unlimited correction requests, potentially stalling a capital raise indefinitely, which effectively pulls the plug on the entire deal.
Kum Yang's one is valid today; if no new correction requests arise, the capital increase proceeds. Korea Zinc faces a likely request on the 14th, causing a 2-week delay.


Clearing up the FSS's Authority on Capital Increases in Korea: Korea Zinc & Kum Yang

<ul>
<li>Personally, the key trading angle is Kum Yang’s exit, which could slash entry costs for the capital raise, with the review announcement dropping as stock rights trading starts.</li>
<li>Along with the usual hit to the pricing from index trackers unloading for rebalancing, there’s a strong chance their sell orders might also include stock rights.</li>
<li>From an entry cost perspective, this November review could trigger a sharp, short-term drop in costs due to stock rights dumping, similar to what we saw with CJ CGV.</li>
</ul>


Personally, the key trading angle is Kum Yang’s exit, which could slash entry costs for the capital raise, with the review announcement dropping as stock rights trading starts.
Along with the usual hit to the pricing from index trackers unloading for rebalancing, there’s a strong chance their sell orders might also include stock rights.
From an entry cost perspective, this November review could trigger a sharp, short-term drop in costs due to stock rights dumping, similar to what we saw with CJ CGV.


Connecting the Dots Between Kum Yang’s Rights Offer & Global Index November Review

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>There are a few stocks in Korea that have outperformed/ underperformed their peers and could be added to or deleted from global passive portfolios next month.</li>
<li>There could be buying in <a href="https://www.smartkarma.com/entities/hyundai-rotem-company" target="_blank" data-smartkarma-citation="entities:1554:1" rel="noopener">Hyundai Rotem</a>, while there could be selling in <a href="https://www.smartkarma.com/entities/kt-corp" target="_blank" data-smartkarma-citation="entities:1112:1" rel="noopener">KT Corp</a>, <a href="https://www.smartkarma.com/entities/celltrion-pharm-inc" target="_blank" data-smartkarma-citation="entities:992:1" rel="noopener">Celltrion Pharm</a>, <a href="https://www.smartkarma.com/entities/kum-yang-co-ltd" target="_blank" data-smartkarma-citation="entities:10364:1" rel="noopener">Kum Yang</a>, <a href="https://www.smartkarma.com/entities/hyundai-engineering-construction" target="_blank" data-smartkarma-citation="entities:4292:1" rel="noopener">Hyundai Engineering &amp; Construction</a>, <a href="https://www.smartkarma.com/entities/hyundai-steel-company" target="_blank" data-smartkarma-citation="entities:963:1" rel="noopener">Hyundai Steel</a>, <a href="https://www.smartkarma.com/entities/cosmoam-t-co-ltd" target="_blank" data-smartkarma-citation="entities:10360:1" rel="noopener">CosmoAM&amp;T</a> and <a href="https://www.smartkarma.com/entities/l-f-co-ltd" target="_blank" data-smartkarma-citation="entities:14300:1" rel="noopener">L&amp;F</a>.</li>
<li>Based on our estimate of passive assets, trackers will need to trade between US$57m to US$230m of the stocks. Impact will vary between 3x-14.5x of ADV to trade.</li>
</ul>


There are a few stocks in Korea that have outperformed/ underperformed their peers and could be added to or deleted from global passive portfolios next month.
There could be buying in Hyundai Rotem, while there could be selling in KT Corp, Celltrion Pharm, Kum Yang, Hyundai Engineering &amp; Construction, Hyundai Steel, CosmoAM&amp;T and L&amp;F.
Based on our estimate of passive assets, trackers will need to trade between US$57m to US$230m of the stocks. Impact will vary between 3x-14.5x of ADV to trade.


Korea: Stocks with Potential Passive Flows in November

Equity Capital Markets

<ul>
<li>Kumyang's major shareholders are backing the capital raise, committing ₩160B of the ₩450B total. We’re also likely to see some robust price support for the stock rights in early phases.</li>
<li>Institutional investors still make up about 10% of the SO, with around 8% being active players. These guys could easily start dumping stock rights in bulk.</li>
<li>Retail holds nearly 50% of the SO, increasing volatility and boosting chances for arb spreads. Kumyang's stock futures have solid liquidity, making it a prime arb trading setup.</li>
</ul>


Kumyang's major shareholders are backing the capital raise, committing ₩160B of the ₩450B total. We’re also likely to see some robust price support for the stock rights in early phases.
Institutional investors still make up about 10% of the SO, with around 8% being active players. These guys could easily start dumping stock rights in bulk.
Retail holds nearly 50% of the SO, increasing volatility and boosting chances for arb spreads. Kumyang's stock futures have solid liquidity, making it a prime arb trading setup.


Kumyang's Capital Raise Drop: Breaking It Down from an Arb Trading Play

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Douglas Research Advisory

<ul>
<li>Kum Yang announced a rights offering capital raise of 450 billion won which will be used for facility investments and debt repayment. </li>
<li>The estimated rights offering price is 38,950 won, which is 31% lower than current price (56,500 won). </li>
<li><em><strong>We remain negative on Kum Yang. Despite the sharply lower rights offering price relative to current price, we would avoid the rights offering. </strong></em></li>
</ul>


Kum Yang announced a rights offering capital raise of 450 billion won which will be used for facility investments and debt repayment. 
The estimated rights offering price is 38,950 won, which is 31% lower than current price (56,500 won). 
We remain negative on Kum Yang. Despite the sharply lower rights offering price relative to current price, we would avoid the rights offering. 


Kum Yang: Rights Offering Capital Raise of 450 Billion Won

South Korea

Kum Yang Co., Ltd. specializes in manufacturing blowing agents to foam rubber products and polymers.  The Company also produces other basic fine chemicals, such as sulphur products.

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Kum Yang (001570 KS)

Clearing up the FSS's Authority on Capital Increases in Korea: Korea Zinc & Kum Yang

This post dives into the key points of confusion around the FSS's correction request process for capital increases in Korea.

Sanghyun Park

Connecting the Dots Between Kum Yang’s Rights Offer & Global Index November Review

This post outlines the current screening status of the Global Index November Review for Korean stocks and explores how it could impact Kum Yang's...

Sanghyun Park

Korea: Stocks with Potential Passive Flows in November

There could be 1 add and up to 7 deletes from global passive portfolios in Nov. Trackers will need to trade between US$57m to US$230m of the...

Brian Freitas

Kumyang's Capital Raise Drop: Breaking It Down from an Arb Trading Play

This post breaks down Kumyang’s rights issue, officially accounced yesterday, and dives into it from an arb trading play.

Sanghyun Park

Kum Yang: Rights Offering Capital Raise of 450 Billion Won

Kum Yang announced a rights offering capital raise of 450 billion won. The estimated rights offering price is 38,950 won, which is 31% lower than...

Douglas Kim

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