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 March KOSPI 200 futures, expect a 0.95% to 1% yield for spot-futures arbitrage, with contango depending on year-end ex-div trends and passive inflows.</li>
<li>Passive inflows into the value-up index in January and spillover effects into K200 futures, potentially fueling year-end contango due to overlap with KOSPI 200.</li>
<li>Prop trader dynamics are cooling off: Tax-driven buying in December, selling in January likely to ease, reducing the past backwardation. Without it, expect higher volatility in K200 futures.</li>
</ul>


For March KOSPI 200 futures, expect a 0.95% to 1% yield for spot-futures arbitrage, with contango depending on year-end ex-div trends and passive inflows.
Passive inflows into the value-up index in January and spillover effects into K200 futures, potentially fueling year-end contango due to overlap with KOSPI 200.
Prop trader dynamics are cooling off: Tax-driven buying in December, selling in January likely to ease, reducing the past backwardation. Without it, expect higher volatility in K200 futures.


Digging into the Year-End Divvy Arbitrage Game in Korea's Market

<ul>
<li>Ssangyong C&amp;E will be excluded in June pre-delisting due to the float rate rule. Replacement will be chosen from the highest market cap existing constituents excluded in the June review.</li>
<li>Likely owing to the recent expansion of macro variables in the local market, a clear correlation between results and price impact is not observed even at the screening period's conclusion.</li>
<li>There's a chance of price impact closer to the effective date, suggesting potentially more effective basket trading. However, short instrument absence necessitates using market indices as hedges.</li>
</ul>


Ssangyong C&amp;E will be excluded in June pre-delisting due to the float rate rule. Replacement will be chosen from the highest market cap existing constituents excluded in the June review.
Likely owing to the recent expansion of macro variables in the local market, a clear correlation between results and price impact is not observed even at the screening period's conclusion.
There's a chance of price impact closer to the effective date, suggesting potentially more effective basket trading. However, short instrument absence necessitates using market indices as hedges.


Addressing Areas of Confusion Surrounding the KOSPI 200 June Rebalancing

<ul>
<li>It would be prudent to anticipate that a considerable portion of these 636 companies will indeed adjust their dividend record dates, effective from this year's year-end dividends.</li>
<li>One notable setup gaining attention is calendar spread trading for the KOSPI 200 futures in anticipation of an upward trend in the KOSPI 200 futures market towards the year's end.</li>
<li>This entails buying the near-month and selling the far-month, liquidating when the price difference reverts. Traders pay attention to potential far-month divergence due to the shift in dividend record dates.</li>
</ul>


It would be prudent to anticipate that a considerable portion of these 636 companies will indeed adjust their dividend record dates, effective from this year's year-end dividends.
One notable setup gaining attention is calendar spread trading for the KOSPI 200 futures in anticipation of an upward trend in the KOSPI 200 futures market towards the year's end.
This entails buying the near-month and selling the far-month, liquidating when the price difference reverts. Traders pay attention to potential far-month divergence due to the shift in dividend record dates.


KOSPI 200 Futures Calendar Spread Trading: Latest on Year-End Dividend Record Date Changes

<ul>
<li>The pivotal question now is the number of these companies that will effectively defer their year-end ex-dividend date to April next year.</li>
<li>The most reliable way to accurately confirm this would be to check how many of them will publicly announce the dividend reference date two weeks before the December year-end deadline.</li>
<li>This will serve as the most critical indicator in determining whether this year's year-end flow trading event, the most significant in Korea, will recur.</li>
</ul>


The pivotal question now is the number of these companies that will effectively defer their year-end ex-dividend date to April next year.
The most reliable way to accurately confirm this would be to check how many of them will publicly announce the dividend reference date two weeks before the December year-end deadline.
This will serve as the most critical indicator in determining whether this year's year-end flow trading event, the most significant in Korea, will recur.


Key Points to Consider at This Stage Regarding the Year-End Ex-Dividend Play

<ul>
<li>It is highly probable that SP trading will increase after July 31st, as this will provide a more conducive environment for the seamless rollover of large positions.</li>
<li>Considering the actual impact on the market, we may have to pay more attention to the potential surge in trading volume for single-stock futures SP.</li>
<li>We see a rise in aggressive position setups in event trading, including rights offerings. This may lead to a more substantial price impact by increasing the intensity of such trading.</li>
</ul>


It is highly probable that SP trading will increase after July 31st, as this will provide a more conducive environment for the seamless rollover of large positions.
Considering the actual impact on the market, we may have to pay more attention to the potential surge in trading volume for single-stock futures SP.
We see a rise in aggressive position setups in event trading, including rights offerings. This may lead to a more substantial price impact by increasing the intensity of such trading.


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