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>For KODEX (FnGuide), the actual rebalancing trading must have begun yesterday, Feb 8, and runs until Feb 22, presumably at an equal daily weighting.</li>
<li>TIGER (WISE) announced that its implementation of LG Energy IN/LG Chem OUT was completed as of the end of yesterday.</li>
<li>As for the daily passive impact from KODEX until Feb 22, LG Energy is expected to receive an inflow of 0.03x DTV, whereas LG Chem's outflow should be -0.10x ADTV.</li>
</ul>


For KODEX (FnGuide), the actual rebalancing trading must have begun yesterday, Feb 8, and runs until Feb 22, presumably at an equal daily weighting.
TIGER (WISE) announced that its implementation of LG Energy IN/LG Chem OUT was completed as of the end of yesterday.
As for the daily passive impact from KODEX until Feb 22, LG Energy is expected to receive an inflow of 0.03x DTV, whereas LG Chem's outflow should be -0.10x ADTV.


LG Energy IN/LG Chem OUT: TIGER (WISE) Done on Feb 8 & KODEX (FnGuide) Under Progress Until Feb 22

<ul>
<li>As for LG Energy's inclusion timing, Solactive made a rule change, presumably designed for LG Energy's earlier entry on April 29.</li>
<li>Since LG Chem also has a battery-related business, LG Chem may remain in this index. However, the possibility should be low because its battery business is small in total sales.</li>
<li>LG Chem will experience an outflow of ₩250B (1.0x ADTV). And assuming that LG Energy receives 4.75%, a passive impact of 0.31x at a DTV of 1.5M shares is expected.</li>
</ul>


As for LG Energy's inclusion timing, Solactive made a rule change, presumably designed for LG Energy's earlier entry on April 29.
Since LG Chem also has a battery-related business, LG Chem may remain in this index. However, the possibility should be low because its battery business is small in total sales.
LG Chem will experience an outflow of ₩250B (1.0x ADTV). And assuming that LG Energy receives 4.75%, a passive impact of 0.31x at a DTV of 1.5M shares is expected.


Solactive Global Lithium Index (LIT): Earlier Implementation Expected for LG Energy & LG Chem

<ul>
<li>There is recently a growing view that the ETF operators (KODEX and TIGER) will conduct most of the rebalancing trading on February 9 to avoid excessive tracking errors.</li>
<li>
LG Chem will face an outflow of ₩0.38T (0.8% of SO and 1.37x ADTV). LG Energy would be 0.36x ADTV and 0.31% of SO, assuming a DTV of 2M shares.</li>
<li>This is definitely a clear long/short setup opportunity: LG Energy LONG/LG Chem SHORT position. Alternatively, we can also consider approaching this event with Battery ETFs LONG/LG Chem Short setup.</li>
</ul>


There is recently a growing view that the ETF operators (KODEX and TIGER) will conduct most of the rebalancing trading on February 9 to avoid excessive tracking errors.

LG Chem will face an outflow of ₩0.38T (0.8% of SO and 1.37x ADTV). LG Energy would be 0.36x ADTV and 0.31% of SO, assuming a DTV of 2M shares.
This is definitely a clear long/short setup opportunity: LG Energy LONG/LG Chem SHORT position. Alternatively, we can also consider approaching this event with Battery ETFs LONG/LG Chem Short setup.


LG Energy & LG Chem Passive Flow In/Out Estimations & Trading Considerations on February 9

<ul>
<li>The screening period for the upcoming rebalancing is May 3-31. LG Energy satisfies the 3-month minimum listing requirement, so it becomes eligible to join the Index in this rebalancing.</li>
<li>LG Energy will likely receive an inflow of ₩44.6B, 0.04% of SO. Considering its tight real-world float (less than 6%), it would still be something we don't want to overlook.</li>
<li>What is critical is an estimated outflow size of Celltrion. It would be about the same amount, but relative to its ADTV, it will be -0.26x.</li>
</ul>


The screening period for the upcoming rebalancing is May 3-31. LG Energy satisfies the 3-month minimum listing requirement, so it becomes eligible to join the Index in this rebalancing.
LG Energy will likely receive an inflow of ₩44.6B, 0.04% of SO. Considering its tight real-world float (less than 6%), it would still be something we don't want to overlook.
What is critical is an estimated outflow size of Celltrion. It would be about the same amount, but relative to its ADTV, it will be -0.26x.


FnGuide TIGER Top 10 Rebalancing: LG Energy IN & Celltrion OUT

<ul>
<li>The screening results based on the average market cap for the screening period until the last closing price have seven additions/deletions.</li>
<li>LG Energy will make Fast Entry. The one to make room for LG Energy should be Dongwon F&amp;B, an additional deletion to the seven deletions through the preliminary filtering.</li>
<li>F&amp;F Holdings may fail to meet the minimum float rate. If it doesn't make KOSPI 200 this time, Hyundai Marine &amp; Fire Insurance will get to stay in the Index.</li>
</ul>


The screening results based on the average market cap for the screening period until the last closing price have seven additions/deletions.
LG Energy will make Fast Entry. The one to make room for LG Energy should be Dongwon F&amp;B, an additional deletion to the seven deletions through the preliminary filtering.
F&amp;F Holdings may fail to meet the minimum float rate. If it doesn't make KOSPI 200 this time, Hyundai Marine &amp; Fire Insurance will get to stay in the Index.


KOSPI 200 Rebalancing Screening: Prediction Likelihood, Special Issues, & Passive Impacts

South Korea

LG Energy Solution produces and sells batteries. The Company manufactures and sells automobile batteries, small batteries, energy storage system batteries, and other products. LG Energy Solution markets its products worldwide.

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LG Energy Solution (373220 KS)

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