Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Event-Driven

<ul>
<li>Meritz Financial confirmed the total number of treasury shares resulting from the mergers, amounting to 5.04% of SO. When combined with the largest shareholder's stake, the float rate becomes 47.75%.</li>
<li>We should focus on direct rebalancing flow through KS200 ETFs on T-1 effective rather than setting it up preemptively. The estimated total AUM of ETFs directly mirroring KS200 is ₩17T.</li>
<li>Meritz Financial is expected to receive an inflow of around ₩43B, equivalent to 1.35x ADTV. This is a significant flow impact size as a single-day event.</li>
</ul>


Meritz Financial confirmed the total number of treasury shares resulting from the mergers, amounting to 5.04% of SO. When combined with the largest shareholder's stake, the float rate becomes 47.75%.
We should focus on direct rebalancing flow through KS200 ETFs on T-1 effective rather than setting it up preemptively. The estimated total AUM of ETFs directly mirroring KS200 is ₩17T.
Meritz Financial is expected to receive an inflow of around ₩43B, equivalent to 1.35x ADTV. This is a significant flow impact size as a single-day event.


Meritz Financial: Main Target for Flow Trading in KS200 June Rebalancing

Korea/Asia, Events, IPOs/Douglas Research Advisory

Douglas Kim

<ul>
<li>On 17 March (after market close), Meritz Financial Group (138040 KS) announced a share buyback program worth 400 billion won, which represents 5.4% of its market cap.</li>
<li>Given the relative large size of this deal, it should have a positive impact on its share price, especially on a relative basis against its competitors. </li>
<li>The collapse of SVB Financial and uncertain investors' reactions on the purchase of Credit Suisse by UBS will likely add to the global investors' negative sentiment on the financial sector. </li>
</ul>


On 17 March (after market close), Meritz Financial Group (138040 KS) announced a share buyback program worth 400 billion won, which represents 5.4% of its market cap.
Given the relative large size of this deal, it should have a positive impact on its share price, especially on a relative basis against its competitors. 
The collapse of SVB Financial and uncertain investors' reactions on the purchase of Credit Suisse by UBS will likely add to the global investors' negative sentiment on the financial sector. 


Meritz Financial Group: A Large Share Buyback Amid Global Financials Uncertainties

<ul>
<li>The swap arb spread has been consistently within the 3% to 5% band since November 23, when arb trading should have actually started.</li>
<li>Meritz Financial's buyback seems to be making it difficult to build positions on expectations that the price gap relative to Fire and Securities will converge quickly with the swap ratio.</li>
<li>As the actual risk of repaying financial borrows is small, we should start building up positions two weeks before the end of January, aiming to exit in early or mid-February.</li>
</ul>


The swap arb spread has been consistently within the 3% to 5% band since November 23, when arb trading should have actually started.
Meritz Financial's buyback seems to be making it difficult to build positions on expectations that the price gap relative to Fire and Securities will converge quickly with the swap ratio.
As the actual risk of repaying financial borrows is small, we should start building up positions two weeks before the end of January, aiming to exit in early or mid-February.


Discussing Why Meritz Swap Spread Not Being Narrowed & When to Enter

<ul>
<li>The last trading day to secure appraisal rights is today (the 22nd). You must buy stocks by today to make arb trade possible using appraisal rights.</li>
<li>We should consider LONG FINANCIAL SHORT FIRE/SECURITIES. KSD allows us to maintain borrowed stocks of the target company without redemption procedures if new stocks are listed after the merger.</li>
<li>K200 trackers will have to buy in for FIRE at the close on January 27, whereas SECURITIES will be on March 31. We should design a setup targeting this preemptively.</li>
</ul>


The last trading day to secure appraisal rights is today (the 22nd). You must buy stocks by today to make arb trade possible using appraisal rights.
We should consider LONG FINANCIAL SHORT FIRE/SECURITIES. KSD allows us to maintain borrowed stocks of the target company without redemption procedures if new stocks are listed after the merger.
K200 trackers will have to buy in for FIRE at the close on January 27, whereas SECURITIES will be on March 31. We should design a setup targeting this preemptively.


Meritz Merger Event: Swap Conditions, Spread Arb Trade, & K200 Flow Implementation

<ul>
<li>After the market close today, Meritz Financial Group (MFG) made one of the biggest announcements in the history of the group.</li>
<li>It announced that Meritz Fire &amp; Marine Insurance and Meritz Securities will become fully owned subsidiaries of Meritz Financial Group. Meritz F&amp;M Insurance and Meritz Securities will also be delisted.</li>
<li>MFG is making a real positive change through the share swaps among the three companies. This will likely have the biggest positive impact will be on MFG. </li>
</ul>


After the market close today, Meritz Financial Group (MFG) made one of the biggest announcements in the history of the group.
It announced that Meritz Fire &amp; Marine Insurance and Meritz Securities will become fully owned subsidiaries of Meritz Financial Group. Meritz F&amp;M Insurance and Meritz Securities will also be delisted.
MFG is making a real positive change through the share swaps among the three companies. This will likely have the biggest positive impact will be on MFG. 


Meritz Financial Group: Comprehensive Stock Swap + Delisting of Meritz Sec. And Meritz F&M Insurance

South Korea

Meritz Financial Group Inc is a holding company of Meritz Securities, Meritz Asset Management, Meritz Financial Information Service and et cetera. The Company manages and controls its financial subsidiaries.

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Meritz Financial Group (138040 KS)

Meritz Financial: Main Target for Flow Trading in KS200 June Rebalancing

This post investigates the free-float rate of Meritz Financial after the two mergers this year, as it is expected to be the main target for flow...

Sanghyun Park

Discussing Why Meritz Swap Spread Not Being Narrowed & When to Enter

This post discusses why the Meritz swap arb yield is not being narrowed and when would be the ideal entry point to build up our positions.

Sanghyun Park

Meritz Merger Event: Swap Conditions, Spread Arb Trade, & K200 Flow Implementation

This post details the three-way swap merger event of Meritz Financial Group and examines the spread arbitrage trade along with the KOSPI 200...

Sanghyun Park

Meritz Financial Group: Comprehensive Stock Swap + Delisting of Meritz Sec. And Meritz F&M Insurance

Meritz Financial Group (MFG) is making a real positive change through the share swaps among the three Meritz companies. This will likely have the...

Douglas Kim

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Meritz Financial: Main Target for Flow Trading in KS200 June Rebalancing

This post investigates the free-float rate of Meritz Financial after the two mergers this year, as it is expected to be the main target for flow...

Sanghyun Park

Meritz Financial Group: A Large Share Buyback Amid Global Financials Uncertainties

On 17 March (after market close), Meritz Financial Group (138040 KS) announced a share buyback program worth 400 billion won, which represents 5.4%...

Douglas Kim

Discussing Why Meritz Swap Spread Not Being Narrowed & When to Enter

This post discusses why the Meritz swap arb yield is not being narrowed and when would be the ideal entry point to build up our positions.

Sanghyun Park

Meritz Merger Event: Swap Conditions, Spread Arb Trade, & K200 Flow Implementation

This post details the three-way swap merger event of Meritz Financial Group and examines the spread arbitrage trade along with the KOSPI 200...

Sanghyun Park

Meritz Financial Group: Comprehensive Stock Swap + Delisting of Meritz Sec. And Meritz F&M Insurance

Meritz Financial Group (MFG) is making a real positive change through the share swaps among the three Meritz companies. This will likely have the...

Douglas Kim