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.

Index Rebalance

<ul>
<li>Unexpectedly, KRX included Cosmo AM&amp;T (005070 KS) despite not meeting the market cap cutoff and excluded DB Hitek (000990 KS) and Lotte Energy Materials (020150 KS).</li>
<li>Cosmo AM&amp;T's unexpected inclusion triggers a significant one-day passive flow event through the KOSPI 200 IT, the sector index with the largest AUM.</li>
<li>Sector index rebalancing, a single-day event managed by one ETF operator, more significantly correlates flow direction with price impact. We should consider a long-short setup for these on June 13th.</li>
</ul>


Unexpectedly, KRX included Cosmo AM&amp;T (005070 KS) despite not meeting the market cap cutoff and excluded DB Hitek (000990 KS) and Lotte Energy Materials (020150 KS).
Cosmo AM&amp;T's unexpected inclusion triggers a significant one-day passive flow event through the KOSPI 200 IT, the sector index with the largest AUM.
Sector index rebalancing, a single-day event managed by one ETF operator, more significantly correlates flow direction with price impact. We should consider a long-short setup for these on June 13th.


Unexpected Inclusion of Cosmo AM&T in KOSPI 200 Sparks Notable One-Day Flow Via KOSPI 200 IT

Event-Driven

<ul>
<li>I confirmed that Posco DX will be incorporated into the KOSPI 200 IT Sector Index. The implementation date for this is also scheduled for March 15th.</li>
<li>The direct flow size from the KOSPI 200 IT into Posco DX is approximately 0.3x ADTV, implying a noteworthy price impact on March 14th, concentrated from 2:00 PM to close. </li>
<li>When designing Posco DX's March 14 KOSPI 200 inclusion flow setup, we must also proactively design strategies to capture flows from the KOSPI 200 IT within a narrow time window.</li>
</ul>


I confirmed that Posco DX will be incorporated into the KOSPI 200 IT Sector Index. The implementation date for this is also scheduled for March 15th.
The direct flow size from the KOSPI 200 IT into Posco DX is approximately 0.3x ADTV, implying a noteworthy price impact on March 14th, concentrated from 2:00 PM to close. 
When designing Posco DX's March 14 KOSPI 200 inclusion flow setup, we must also proactively design strategies to capture flows from the KOSPI 200 IT within a narrow time window.


Posco DX Included in KOSPI 200 IT Sector Index: Exploring Flow Trading Implications

Samsung KODEX Top5Plus Total Return ETF / Event-Driven

Samsung KODEX Top5Plus Total Return ETF (315930 KS)

<ul>
<li>Korea's financial authorities prompted LPs to refrain from providing liquidity to ETFs through short-selling. This has resulted in a significant increase in both the frequency and magnitude of tracking errors.</li>
<li>Therefore, it's time to actively explore this from an arbitrage trading standpoint. ETF arbitrage involves straightforward steps: purchasing and redeeming ETFs, followed by selling the underlying shares in the market.</li>
<li>The focus should be particularly directed towards sector ETFs that include a select few large-cap stocks carrying single-stock futures.</li>
</ul>


Korea's financial authorities prompted LPs to refrain from providing liquidity to ETFs through short-selling. This has resulted in a significant increase in both the frequency and magnitude of tracking errors.
Therefore, it's time to actively explore this from an arbitrage trading standpoint. ETF arbitrage involves straightforward steps: purchasing and redeeming ETFs, followed by selling the underlying shares in the market.
The focus should be particularly directed towards sector ETFs that include a select few large-cap stocks carrying single-stock futures.


Investigating Arbitrage Trading Potential to Exploit ETF Tracking Error Widening in Korea

<ul>
<li>KRX did not acknowledge any business relevance between SK Square and the Semicon industry, leading to its exclusion from the KRX Semicon after the GICS change.</li>
<li>We should consider the strong possibility that this same approach will be applied in the upcoming December KOSPI 200 IT rebalancing.</li>
<li>If we observe a somewhat unusual downward trend in SK Square's price from the 15th, this could be seen as a hint foretelling the announcement of SK Square's exclusion.</li>
</ul>


KRX did not acknowledge any business relevance between SK Square and the Semicon industry, leading to its exclusion from the KRX Semicon after the GICS change.
We should consider the strong possibility that this same approach will be applied in the upcoming December KOSPI 200 IT rebalancing.
If we observe a somewhat unusual downward trend in SK Square's price from the 15th, this could be seen as a hint foretelling the announcement of SK Square's exclusion.


Exploring Fresh Flow Trading Prospects for SK Square: Targeting Exclusion from KOSPI 200 IT

<ul>
<li>The fact that KS200 IT has a significantly higher AUM provides a flow trading opportunity. This is due to the change in GICS for Kakao Pay from IT to Financials.</li>
<li>It has been observed that Kakao Pay's DTV has recently decreased significantly. This may result in the flow size reaching up to 1.4 times DTV.</li>
<li>It is advisable to design an outright short position for day trading purposes. Additionally, a more aggressive approach can be considered by combining a long position on Samsung SDS.</li>
</ul>


The fact that KS200 IT has a significantly higher AUM provides a flow trading opportunity. This is due to the change in GICS for Kakao Pay from IT to Financials.
It has been observed that Kakao Pay's DTV has recently decreased significantly. This may result in the flow size reaching up to 1.4 times DTV.
It is advisable to design an outright short position for day trading purposes. Additionally, a more aggressive approach can be considered by combining a long position on Samsung SDS.


Official Results of KOSPI 200 Sector Indices Rebalancing: Kakao Pay's Sector Change Confirmed

South Korea

Mirae Asset Tiger 200 IT ETF is an ETF established in South Korea.The Fund's objective is to trackthe performance of the Kospi200 IT Sector Index. The funds invests at least 80% of its assets in domestic equities.

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Mirae Asset Tiger 200 It ETF (139260 KP)

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Official Results of KOSPI 200 Sector Indices Rebalancing: Kakao Pay's Sector Change Confirmed

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