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

Lotte Tour Development Co, Ltd. / Event-Driven

Lotte Tour Development Co, Ltd. (032350 KS)

<ul>
<li>Lotte Tour has emerged as a prominent short-selling target in the Korean market, and there are efforts to use an ₩80B convertible bond (CB) to exploit its dilution/overhang risk.</li>
<li>Linden Capital and LMR, upon obtaining the CB, promptly borrowed 4.6M shares from Donghwa for short selling. Thus, the CB conversion incentive remains largely unaffected by stock price changes.</li>
<li>We should avoid synchronizing our entry point with CB conversion. Instead, we should target the likely rights issuance in the latter half of the year, anticipated in the market.</li>
</ul>


Lotte Tour has emerged as a prominent short-selling target in the Korean market, and there are efforts to use an ₩80B convertible bond (CB) to exploit its dilution/overhang risk.
Linden Capital and LMR, upon obtaining the CB, promptly borrowed 4.6M shares from Donghwa for short selling. Thus, the CB conversion incentive remains largely unaffected by stock price changes.
We should avoid synchronizing our entry point with CB conversion. Instead, we should target the likely rights issuance in the latter half of the year, anticipated in the market.


Addressing Misconceptions: Lotte Tour's Short-Selling Entry Point

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<ul>
<li>Paradise is one of the largest foreigners only casino operators in Korea which should benefit from the end of the ban of Chinese group tours to Korea.</li>
<li>However, Paradise will face additional competition from the opening of the new Inspire Entertainment Resort in Incheon which is expected to open by the end of 2023. </li>
<li>Paradise is likely to benefit from a combination of higher earnings and valuation multiples in the coming months. </li>
</ul>


Paradise is one of the largest foreigners only casino operators in Korea which should benefit from the end of the ban of Chinese group tours to Korea.
However, Paradise will face additional competition from the opening of the new Inspire Entertainment Resort in Incheon which is expected to open by the end of 2023. 
Paradise is likely to benefit from a combination of higher earnings and valuation multiples in the coming months. 


Paradise: Boost from End of Ban of Chinese Group Tours to Korea Vs Inspire Resort Opening in Incheon

<ul>
<li>In the past several days, there have been numerous new flow that the Chinese government is likely to allow group tours to South Korea and Japan in the coming days. </li>
<li>The group tours from China to South Korea which has been banned since March 2017, are expected to resume after six years, according to the Korean Embassy in China.</li>
<li>Nikkei Asia also reported on 9 August that the Chinese government is ready to allow group tours to Japan as early as this week.</li>
</ul>


In the past several days, there have been numerous new flow that the Chinese government is likely to allow group tours to South Korea and Japan in the coming days. 
The group tours from China to South Korea which has been banned since March 2017, are expected to resume after six years, according to the Korean Embassy in China.
Nikkei Asia also reported on 9 August that the Chinese government is ready to allow group tours to Japan as early as this week.


China to Finally Allow Group Tours to Korea and Japan?

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

Quantitative Analysis

<ul>
<li>Total short interest in Hong Kong is HK$435.1bn, marginally higher from end-December. Short notional has moved in line with the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a>. </li>
<li>Total short notional of the KOSPI and KOSDAQ market has moved up since end-December and is in line with the move higher in the <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200-index" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">KOSPI2 INDEX</a> and <a href="https://www.smartkarma.com/entities/kosdaq-150-index" target="_blank" data-smartkarma-citation="entities:31077:1" rel="noopener">KOSDAQ 150 Index</a>.</li>
<li>Short notional in Taiwan is lower over the quarter even as the <a href="https://www.smartkarma.com/entities/taiwan-stock-exchange-weighted-index" target="_blank" data-smartkarma-citation="entities:26056:1" rel="noopener">TWSE INDEX</a> has moved higher over the period. There has been big short covering on some stocks.</li>
</ul>


Total short interest in Hong Kong is HK$435.1bn, marginally higher from end-December. Short notional has moved in line with the Hong Kong Hang Seng Index (HSI INDEX). 
Total short notional of the KOSPI and KOSDAQ market has moved up since end-December and is in line with the move higher in the KOSPI2 INDEX and KOSDAQ 150 Index.
Short notional in Taiwan is lower over the quarter even as the TWSE INDEX has moved higher over the period. There has been big short covering on some stocks.


Short Interest Movements (Q1 2023): HK, Korea, Taiwan, Australia

<ul>
<li>Chairman Kim of the FSC mentioned potential rule changes in disclosing the names of short sellers at the state audit last Thursday.</li>
<li>The first is to reveal the identity of short sellers who traded through a swap contract with a broker, which is currently exempt from the short-selling disclosure obligation.</li>
<li>The second is to disclose the identity of investors caught in illegal short-selling activities, mostly naked short-selling and wall-crossing.</li>
</ul>


Chairman Kim of the FSC mentioned potential rule changes in disclosing the names of short sellers at the state audit last Thursday.
The first is to reveal the identity of short sellers who traded through a swap contract with a broker, which is currently exempt from the short-selling disclosure obligation.
The second is to disclose the identity of investors caught in illegal short-selling activities, mostly naked short-selling and wall-crossing.


Rule Changes in Disclosing the Identities of Foreign Short Sellers in Korea

South Korea

Lotte Tour Development Co., Ltd. provides various tour package service. The Company franchises travel agencies, offers home-based travel businesses, and provides leisure-travel information.  The Company also engages in property development and building management and operates duty-free shop business.

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Lotte Tour Development Co, Ltd. (032350 KS)

Addressing Misconceptions: Lotte Tour's Short-Selling Entry Point

This post provides clarification regarding market misconceptions about the short-selling entry point for Lotte Tour Development.

Sanghyun Park

Paradise: Boost from End of Ban of Chinese Group Tours to Korea Vs Inspire Resort Opening in Incheon

Paradise will receive a big boost from the end of the ban of Chinese group tours to Korea. However, Paradise will face additional competition from...

Douglas Kim

China to Finally Allow Group Tours to Korea and Japan?

The group tours from China to South Korea which has been banned since March 2017, are expected to resume after six years, according to the Korean...

Douglas Kim

Short Interest Movements (Q1 2023): HK, Korea, Taiwan, Australia

The Insight looks at movements in short interest across HK, Korea, Taiwan and Australia stocks over Q1 and highlights large increases/decreases in...

Brian Freitas

Rule Changes in Disclosing the Identities of Foreign Short Sellers in Korea

This post explains what FSC Chairman Kim meant by potential rule changes in the short seller identity disclosure, which he mentioned at the state...

Sanghyun Park

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