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

Index Rebalance

<ul>
<li>As expected, <a href="https://www.smartkarma.com/entities/dgb-financial-group-inc" target="_blank" data-smartkarma-citation="entities:6138:1" rel="noopener">DGB Financial Group (139130 KS)</a> replaces <a href="https://www.smartkarma.com/entities/meritz-securities-co-ltd" target="_blank" data-smartkarma-citation="entities:19692:1" rel="noopener">Meritz Securities (008560 KS)</a> 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">Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX)</a> at the close on 31 March.</li>
<li>We estimate passive trackers will need to buy 5.15m shares (KRW 35.5bn; 12.1 days of ADV) of <a href="https://www.smartkarma.com/entities/dgb-financial-group-inc" target="_blank" data-smartkarma-citation="entities:6138:1" rel="noopener">DGB Financial Group (139130 KS)</a> at the close of trading on 31 March.</li>
<li>
<a href="https://www.smartkarma.com/entities/dgb-financial-group-inc" target="_blank" data-smartkarma-citation="entities:6138:1" rel="noopener">DGB Financial Group (139130 KS)</a> trades cheaper than its peers on forward PE and Price to Book. There could be relative outperformance over the next week.</li>
</ul>


As expected, DGB Financial Group (139130 KS) replaces Meritz Securities (008560 KS) in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the close on 31 March.
We estimate passive trackers will need to buy 5.15m shares (KRW 35.5bn; 12.1 days of ADV) of DGB Financial Group (139130 KS) at the close of trading on 31 March.

DGB Financial Group (139130 KS) trades cheaper than its peers on forward PE and Price to Book. There could be relative outperformance over the next week.


KOSPI200 Ad Hoc Index Rebalance: DGB Financial (139130 KS) To Replace Meritz Sec (008560 KS)

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>Kakao Pay's GICS sector movement from IT to FINANCIALS creates flow trading opportunities due to the subsequent transfer between KOSPI 200's sector sub-indices.</li>
<li>An outflow of ₩24.6B or 410K shares will occur. This is 0.6x ADTV. Given that the recent trading volume has further decreased, the actual impact will likely exceed 1.0x DTV.</li>
<li>It will be a concentrated flow in a single trading day by a single ETF, which gives us plenty of reasons for preemptively designing a short position targeting this.</li>
</ul>


Kakao Pay's GICS sector movement from IT to FINANCIALS creates flow trading opportunities due to the subsequent transfer between KOSPI 200's sector sub-indices.
An outflow of ₩24.6B or 410K shares will occur. This is 0.6x ADTV. Given that the recent trading volume has further decreased, the actual impact will likely exceed 1.0x DTV.
It will be a concentrated flow in a single trading day by a single ETF, which gives us plenty of reasons for preemptively designing a short position targeting this.


Shorting Kakao Pay on K200 Sector Index Passive Outflow Due to GICS Change on June 8

<ul>
<li>K200 ad hoc change announcement date should be March 30 as the buyback ends on March 28, and rebalancing trading should occur on March 31.</li>
<li>From a juice-level perspective, the entry point and timing for JB Financial showed much better performance from EGM approval rather than the announcement.</li>
<li>We should consider gradually building up positions from this point until March 30 announcement or one day after (T-1 effective) while utilizing Kodex Banks ETF to hedge our long positions.</li>
</ul>


K200 ad hoc change announcement date should be March 30 as the buyback ends on March 28, and rebalancing trading should occur on March 31.
From a juice-level perspective, the entry point and timing for JB Financial showed much better performance from EGM approval rather than the announcement.
We should consider gradually building up positions from this point until March 30 announcement or one day after (T-1 effective) while utilizing Kodex Banks ETF to hedge our long positions.


Meritz Merger Approved: Let's Now Discuss Key Dates & Entry Points For LONG DGB Financial

<ul>
<li>
<a href="https://www.smartkarma.com/entities/samyang-foods-co-ltd" target="_blank" data-smartkarma-citation="entities:9100:1" rel="noopener">Samyang Foods (003230 KS)</a> will replace <a href="https://www.smartkarma.com/entities/hyundai-greenfood-co-ltd" target="_blank" data-smartkarma-citation="entities:19560:1" rel="noopener">Hyundai Greenfood (005440 KS)</a> 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">Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX)</a> at the close on 12 April.</li>
<li>We expect <a href="https://www.smartkarma.com/entities/dgb-financial-group-inc" target="_blank" data-smartkarma-citation="entities:6138:1" rel="noopener">DGB Financial Group (139130 KS)</a> will replace <a href="https://www.smartkarma.com/entities/meritz-securities-co-ltd" target="_blank" data-smartkarma-citation="entities:19692:1" rel="noopener">Meritz Securities (008560 KS)</a> in early April.</li>
<li>Then we expect another 3 changes at the regular rebalance in June. The potential adds have moved sharply higher recently and there are flows from other index trackers too.</li>
</ul>



Samyang Foods (003230 KS) will replace Hyundai Greenfood (005440 KS) in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the close on 12 April.
We expect DGB Financial Group (139130 KS) will replace Meritz Securities (008560 KS) in early April.
Then we expect another 3 changes at the regular rebalance in June. The potential adds have moved sharply higher recently and there are flows from other index trackers too.


KOSPI200 Index Rebalance Preview: Changes in April & June

<ul>
<li>With JB Financial Group gone for Meritz Fire, the next one in line will enter KOSPI 200 in place of Meritz Securities. And the lucky one is DGB Financial.</li>
<li>DGB can expect an inflow of 8.23x ADTV and will face a 2.8x ADTV in one day on March 31.</li>
<li>Given the size of the preemptive flow that JB Financial is currently attracting, we should prepare for DBG to start receiving a similar level of price impact earlier than usual.</li>
</ul>


With JB Financial Group gone for Meritz Fire, the next one in line will enter KOSPI 200 in place of Meritz Securities. And the lucky one is DGB Financial.
DGB can expect an inflow of 8.23x ADTV and will face a 2.8x ADTV in one day on March 31.
Given the size of the preemptive flow that JB Financial is currently attracting, we should prepare for DBG to start receiving a similar level of price impact earlier than usual.


KOSPI 200 Ad Hoc Rebalance for Meritz Securities: DGB Financial Will Be Added

South Korea

Meritz Securities Co., Ltd. provides brokerage, underwriting, and securities dealing services in South Korea.  The Company also offers mutual funds, bonds, certificate of deposits (CD), corporate finance, online trading, and related services.

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Meritz Securities (008560 KS)

KOSPI200 Ad Hoc Index Rebalance: DGB Financial (139130 KS) To Replace Meritz Sec (008560 KS)

DGB Financial will be added to the KOSPI200 Index on 31 March. The stock trades cheaper than its peers but becomes short sell eligible from the...

Brian Freitas

Shorting Kakao Pay on K200 Sector Index Passive Outflow Due to GICS Change on June 8

This post investigates the shorting opportunity for Kakao Pay on the potential passive outflow from KOSPI 200 sector index due to the GICS changes.

Sanghyun Park

Meritz Merger Approved: Let's Now Discuss Key Dates & Entry Points For LONG DGB Financial

Entry points and key dates for long positions in DGB Financial following KOSPI 200 ad hoc change due to the Meritz merger

Sanghyun Park

KOSPI200 Index Rebalance Preview: Changes in April & June

There will be 2 changes to the index in April and then another 3 in June. Flows are significant on some stocks. The adds have all moved higher in...

Brian Freitas

KOSPI 200 Ad Hoc Rebalance for Meritz Securities: DGB Financial Will Be Added

This post details the upcoming ad hoc rebalancing of KOSPI 200 for the departure of Meritz Securities. The replacement will be DGB Financial, which...

Sanghyun Park

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