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>TIGER ETF (305540) rebalanced on January 11th, with Ecopro Materials correcting by 4%, contrasting a 20% surge from Jan 8-10. TIGER recorded net purchases aligning with a 2% inclusion weight.</li>
<li>Preemptive positions by local hedge funds were observed from Jan 8-10, closing on the 11th. Despite a KOSPI decline and minimal sector movement, Ecopro Materials exhibited this unusual price pattern.</li>
<li>Observing this pattern implies a potential recurrence during the March rebalancing of KODEX ETF. Notably, local hedge funds may initiate similar preemptive positions. We should consider this in position setup.</li>
</ul>


TIGER ETF (305540) rebalanced on January 11th, with Ecopro Materials correcting by 4%, contrasting a 20% surge from Jan 8-10. TIGER recorded net purchases aligning with a 2% inclusion weight.
Preemptive positions by local hedge funds were observed from Jan 8-10, closing on the 11th. Despite a KOSPI decline and minimal sector movement, Ecopro Materials exhibited this unusual price pattern.
Observing this pattern implies a potential recurrence during the March rebalancing of KODEX ETF. Notably, local hedge funds may initiate similar preemptive positions. We should consider this in position setup.


Spotting Position Patterns: TIGER Battery ETF January Review & KODEX ETF's March Rebalancing

<ul>
<li>Based on the latest closing prices, the potential INs/OUTs are as follows. INs: Soulbrain &amp; Enchem / OUTs: Chunbo &amp; Solus Advanced Materials</li>
<li>While the overall market liquidity constraints due to the short-selling ban could exacerbate the price impact on the rebalancing day, it may reduce the flexibility of our Long-Short setup strategies.</li>
<li>While Chunbo carries single-stock futures, its liquidity may not be sufficient. So, a more creative Long-Short approach is required, taking into account these factors.</li>
</ul>


Based on the latest closing prices, the potential INs/OUTs are as follows. INs: Soulbrain &amp; Enchem / OUTs: Chunbo &amp; Solus Advanced Materials
While the overall market liquidity constraints due to the short-selling ban could exacerbate the price impact on the rebalancing day, it may reduce the flexibility of our Long-Short setup strategies.
While Chunbo carries single-stock futures, its liquidity may not be sufficient. So, a more creative Long-Short approach is required, taking into account these factors.


TIGER Battery Material ETF Rebal in December: Notable Changes in Constituent Screening

<ul>
<li>In the inaugural constituent selection, FnGuide revealed a noteworthy pattern. Given the smaller market capitalization of the electrolyte suppliers, FnGuide has included only the largest among them in this ETF.</li>
<li>SoulBrain, categorized by FnGuide as an electrolyte supplier like Chunbo, has significantly outperformed Chunbo. As a result, there is a considerable likelihood that SoulBrain will replace Chunbo in December.</li>
<li>The price impact from ETF rebalancing trading has disappeared substantially in Korea. We should focus on the first rebalancing of newly listed ETFs that haven't yet established a learning effect.</li>
</ul>


In the inaugural constituent selection, FnGuide revealed a noteworthy pattern. Given the smaller market capitalization of the electrolyte suppliers, FnGuide has included only the largest among them in this ETF.
SoulBrain, categorized by FnGuide as an electrolyte supplier like Chunbo, has significantly outperformed Chunbo. As a result, there is a considerable likelihood that SoulBrain will replace Chunbo in December.
The price impact from ETF rebalancing trading has disappeared substantially in Korea. We should focus on the first rebalancing of newly listed ETFs that haven't yet established a learning effect.


Overlooked by the Market: A Compelling Long Short Opportunity in Newly-Listed ETF Rebal in Korea

<ul>
<li>We now have an environment that allows Korea's battery ETFs to include LG Chem in upcoming reviews. KODEX is in June, and TIGER is in July.</li>
<li>If LG Chem is included in each review, the expected one-day inflow is at 0.7-0.8x DTV, which can lead to a price impact similar to that of SKIET in 2021.</li>
<li>We should consider setups targeting this, including Long Short, which utilizes LG Energy Solution or LG Corp as a hedge.</li>
</ul>


We now have an environment that allows Korea's battery ETFs to include LG Chem in upcoming reviews. KODEX is in June, and TIGER is in July.
If LG Chem is included in each review, the expected one-day inflow is at 0.7-0.8x DTV, which can lead to a price impact similar to that of SKIET in 2021.
We should consider setups targeting this, including Long Short, which utilizes LG Energy Solution or LG Corp as a hedge.


Flow Trading Opportunities on LG Chem with Potential Inclusion in Battery ETFs

<ul>
<li>WCP will likely be included in the rebalancing of Samsung KODEX Secondary Battery Industry ETF in June. And we should consider the possibility of this happening to be quite high.</li>
<li>We can expect a daily passive inflow of around 0.3x compared to WCP's typical DTV. The practical correlation with the price should be higher than the theoretical level.</li>
<li>We should consider using SKIET, which engages in the same business in the same sector, as a hedge. WCP/SKIET Long Short achieved considerable performance within the past week's window.</li>
</ul>


WCP will likely be included in the rebalancing of Samsung KODEX Secondary Battery Industry ETF in June. And we should consider the possibility of this happening to be quite high.
We can expect a daily passive inflow of around 0.3x compared to WCP's typical DTV. The practical correlation with the price should be higher than the theoretical level.
We should consider using SKIET, which engages in the same business in the same sector, as a hedge. WCP/SKIET Long Short achieved considerable performance within the past week's window.


A High Conviction Long Short Trade in KODEX Battery ETF Rebalancing in June

South Korea

MIRAE ASSET TIGER SECONDARY CELL ETF is an exchange-traded fund issued in South Korea. The objective of the ETF is to seek returns corresponding to the returns of the "WISE Secondary Cell Theme Index".

Mirae Asset TIGER Secondary Cell ETF (305540 KS)

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Mirae Asset TIGER Secondary Cell ETF (305540 KS)

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TIGER Battery Material ETF Rebal in December: Notable Changes in Constituent Screening

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Flow Trading Opportunities on LG Chem with Potential Inclusion in Battery ETFs

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A High Conviction Long Short Trade in KODEX Battery ETF Rebalancing in June

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