Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<ul>
<li>We discuss the surging share cancellations in Korea in 2024. As of 8 February 2024, Korean companies have announced 3.3 trillion won worth of shares to be completed this year. </li>
<li>At current blistering pace, it is likely that the share cancellations in Korea could jump at least 100% YoY to jump more than 10 trillion won in 2024. </li>
<li>Some of the leading Korean companies including Samsung C&amp;T and KT&amp;G that have announced share cancellations this year continue to outperform the market on average. </li>
</ul>


We discuss the surging share cancellations in Korea in 2024. As of 8 February 2024, Korean companies have announced 3.3 trillion won worth of shares to be completed this year. 
At current blistering pace, it is likely that the share cancellations in Korea could jump at least 100% YoY to jump more than 10 trillion won in 2024. 
Some of the leading Korean companies including Samsung C&amp;T and KT&amp;G that have announced share cancellations this year continue to outperform the market on average. 


Korea: Surging Share Cancellations in 2024

<ul>
<li>After the market close on 12 January, OCI Holdings (010060 KS) announced that it plans to acquire a 27.03% stake in Hanmi Science (008930 KS) for 770 billion won. </li>
<li>Through this investment and integration between OCI Holdings and Hanmi Science, the OCI Group and Hanmi Pharmaceutical Group plans to establish a joint management system.</li>
<li><strong>This deal between OCI Holdings and Hanmi Science is not over and it could lead to an M&amp;A fight for the control of Hanmi Science by its family members. </strong></li>
</ul>


After the market close on 12 January, OCI Holdings (010060 KS) announced that it plans to acquire a 27.03% stake in Hanmi Science (008930 KS) for 770 billion won. 
Through this investment and integration between OCI Holdings and Hanmi Science, the OCI Group and Hanmi Pharmaceutical Group plans to establish a joint management system.
This deal between OCI Holdings and Hanmi Science is not over and it could lead to an M&amp;A fight for the control of Hanmi Science by its family members. 


OCI Holdings Plans to Acquire a 27% In Hanmi Science - To Spark a Family Feud?

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.

<ul>
<li>This is a classic swap arbitrage of shorting the acquirer and using the tendered shares to repay it. However, executing now would be meaningless as the swap ratio isn't finalized.</li>
<li>Nevertheless, we should consider securing a long position in OCI Holdings in advance. The target (45%) is quite substantial, indicating that the practical allocation rate won't plummet dangerously below 1.</li>
<li>Additionally, the likelihood of OCI Holdings' swap price plummeting to completely nullify the 5.6% spread immediately after its determination appears to be low based on the current context.</li>
</ul>


This is a classic swap arbitrage of shorting the acquirer and using the tendered shares to repay it. However, executing now would be meaningless as the swap ratio isn't finalized.
Nevertheless, we should consider securing a long position in OCI Holdings in advance. The target (45%) is quite substantial, indicating that the practical allocation rate won't plummet dangerously below 1.
Additionally, the likelihood of OCI Holdings' swap price plummeting to completely nullify the 5.6% spread immediately after its determination appears to be low based on the current context.


OCI Swap Arbitrage: A Bit More Complex Structure, Still Juicy Spread in Play

<ul>
<li>On 28 July, OCI Holdings (010060 KS) announced that it plans to conduct a tender offer to purchase up to 45% stake in OCI Co (456040 KS). </li>
<li>The tender offer price of OCI Co is 139,000 won. The method of this tender offer is to issue new common shares of OCI Holdings.</li>
<li>In the short term (one month), we expect OCI Co's shares to outperform OCI Holdings shares. This deal is structured to mainly benefit the OCI Group's insiders.</li>
</ul>


On 28 July, OCI Holdings (010060 KS) announced that it plans to conduct a tender offer to purchase up to 45% stake in OCI Co (456040 KS). 
The tender offer price of OCI Co is 139,000 won. The method of this tender offer is to issue new common shares of OCI Holdings.
In the short term (one month), we expect OCI Co's shares to outperform OCI Holdings shares. This deal is structured to mainly benefit the OCI Group's insiders.


OCI Holdings Announces a Tender Offer to Buy 45% Stake in OCI Co

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>There will be 2 additions and 2 deletions for 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 June rebalance that will be implemented on 8 June.</li>
<li>
<a href="https://www.smartkarma.com/entities/kum-yang-co-ltd" target="_blank" data-smartkarma-citation="entities:10364:1" rel="noopener">Kum Yang (001570 KS)</a> and <a href="https://www.smartkarma.com/entities/cosmochemical-co-ltd" target="_blank" data-smartkarma-citation="entities:3747:1" rel="noopener">Cosmochemical (005420 KS)</a>, both high probability names, are inclusions while <a href="https://www.smartkarma.com/entities/hwaseung-enterprise-co-ltd" target="_blank" data-smartkarma-citation="entities:35611:1" rel="noopener">Hwaseung Enterprise (241590 KS)</a> and <a href="https://www.smartkarma.com/entities/dongwon-industries-co-ltd" target="_blank" data-smartkarma-citation="entities:1783:1" rel="noopener">Dongwon Industries (006040 KS)</a> are deletions.</li>
<li>Not surpisingly, there is almost no short interest on the adds. Short interest on the deletes is higher and rising. Expect short covering on the deletes prior to implementation.</li>
</ul>


There will be 2 additions and 2 deletions for the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the June rebalance that will be implemented on 8 June.

Kum Yang (001570 KS) and Cosmochemical (005420 KS), both high probability names, are inclusions while Hwaseung Enterprise (241590 KS) and Dongwon Industries (006040 KS) are deletions.
Not surpisingly, there is almost no short interest on the adds. Short interest on the deletes is higher and rising. Expect short covering on the deletes prior to implementation.


KOSPI200 Index Rebalance: Two Sets of Changes

South Korea

OCI Holdings Company Ltd. operates chemical business. The Company manufactures inorganic chemicals, petroleum and coal chemicals, fine chemicals, renewable energy and insulation materials. OCI Holdings markets its products primarily throughout Korea with limited overseas.

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OCI Holdings (010060 KS)

OCI Holdings Plans to Acquire a 27% In Hanmi Science - To Spark a Family Feud?

After the market close on 12 January, OCI Holdings (010060 KS) announced that it plans to acquire a 27.03% stake in Hanmi Science (008930 KS) for...

Douglas Kim

OCI Swap Arbitrage: A Bit More Complex Structure, Still Juicy Spread in Play

This post dissects the OCI swap event, which was announced last Friday, from an arbitrage trading perspective, discussing the trading angles we...

Sanghyun Park

OCI Holdings Announces a Tender Offer to Buy 45% Stake in OCI Co

On 28 July, OCI Holdings (010060 KS) announced that it plans to conduct a tender offer to purchase up to 45% stake in OCI Co (456040 KS). The...

Douglas Kim

KOSPI200 Index Rebalance: Two Sets of Changes

Kumyang & CosmoChem will be added to the KOSPI200 in June. Both stocks ran up a lot and are now correcting - they become short sell eligible from...

Brian Freitas

Price Gauge

52-week Range

Market Cap (USDm)

P/E

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Korea: Surging Share Cancellations in 2024

We discuss the surging share cancellations in Korea in 2024. As of 8 February 2024, Korean companies have announced 3.3 trillion won worth of...

Douglas Kim

OCI Holdings Plans to Acquire a 27% In Hanmi Science - To Spark a Family Feud?

After the market close on 12 January, OCI Holdings (010060 KS) announced that it plans to acquire a 27.03% stake in Hanmi Science (008930 KS) for...

Douglas Kim

OCI Swap Arbitrage: A Bit More Complex Structure, Still Juicy Spread in Play

This post dissects the OCI swap event, which was announced last Friday, from an arbitrage trading perspective, discussing the trading angles we...

Sanghyun Park

OCI Holdings Announces a Tender Offer to Buy 45% Stake in OCI Co

On 28 July, OCI Holdings (010060 KS) announced that it plans to conduct a tender offer to purchase up to 45% stake in OCI Co (456040 KS). The...

Douglas Kim

KOSPI200 Index Rebalance: Two Sets of Changes

Kumyang & CosmoChem will be added to the KOSPI200 in June. Both stocks ran up a lot and are now correcting - they become short sell eligible from...

Brian Freitas