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

I grouped Korea's closely correlated sector pairs within the same GICS sub-category. I applied the additional filtering: 1. a market cap of ₩1T or more and 2. stocks eligible to short-selling (KOSPI 200 and KOSDAQ 150). This grouping returns 141 sector pairs worthy of close monitoring for a long/short trade.<div class="content-highlight">You can find all the 141 sector pairs with the 180-day correlation coefficients and the sigma on a 20-day moving average in the attached file.</div><hr>Below are the top 10 most correlated sector pairs above a 180-day correlation coefficient of 0.95 or higher. They are mostly cyclical stocks, which are in line with our conventional thinking that cyclical stocks have a stronger tendency to move together than growth stocks.<table class="table table-striped">
<colgroup>
<col width="200">
<col width="200">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Comp 1"}'>Comp 1</td>
<td data-sheets-value='{"1":2,"2":"Comp 2"}'>Comp 2</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"180-day correlation coefficient"}'>180-day correlation coefficient</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Business type"}'>Business type</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Hyundai Mipo Dockyard Co., Ltd."}'>Hyundai Mipo Dockyard Co., Ltd.</td>
<td data-sheets-value='{"1":2,"2":"Korea Shipbuilding &amp;Offshore Engn Co Ltd"}'>Korea Shipbuilding &amp;Offshore Engn Co Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.97405}'>0.97405</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Shipbuilding"}'>Shipbuilding</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Hyundai Department Store Co Ltd"}'>Hyundai Department Store Co Ltd</td>
<td data-sheets-value='{"1":2,"2":"Lotte Shopping Co Ltd"}'>Lotte Shopping Co Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.97033}'>0.97033</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Retail"}'>Retail</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"GS Engineering &amp; Construction Corp"}'>GS Engineering &amp; Construction Corp</td>
<td data-sheets-value='{"1":2,"2":"Hyundai Engineering &amp; Construction Co."}'>Hyundai Engineering &amp; Construction Co.</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.96379}'>0.96379</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Construction"}'>Construction</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"HYUNDAI MOBIS CO., LTD."}'>HYUNDAI MOBIS CO., LTD.</td>
<td data-sheets-value='{"1":2,"2":"Hyundai Motor Co"}'>Hyundai Motor Co</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.96145}'>0.96145</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Automotive"}'>Automotive</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Shinhan Financial Group Co., Ltd."}'>Shinhan Financial Group Co., Ltd.</td>
<td data-sheets-value='{"1":2,"2":"KB Financial Group Inc"}'>KB Financial Group Inc</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.95989}'>0.95989</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Commercial bank"}'>Commercial bank</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"LG Innotek Co., Ltd."}'>LG Innotek Co., Ltd.</td>
<td data-sheets-value='{"1":2,"2":"LG Electronics Inc."}'>LG Electronics Inc.</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.95986}'>0.95986</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"IT"}'>IT</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Hansol Chemical Co Ltd"}'>Hansol Chemical Co Ltd</td>
<td data-sheets-value='{"1":2,"2":"Posco Chemical Co Ltd"}'>Posco Chemical Co Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.95374}'>0.95374</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Chemical"}'>Chemical</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Hanwha Aerospace Co Ltd"}'>Hanwha Aerospace Co Ltd</td>
<td data-sheets-value='{"1":2,"2":"Korea Aerospace Industries Ltd"}'>Korea Aerospace Industries Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.95243}'>0.95243</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Aerospace"}'>Aerospace</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"KG DongbuSteel Co Ltd"}'>KG DongbuSteel Co Ltd</td>
<td data-sheets-value='{"1":2,"2":"POSCO"}'>POSCO</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.95174}'>0.95174</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Steel"}'>Steel</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"KG DongbuSteel Co Ltd"}'>KG DongbuSteel Co Ltd</td>
<td data-sheets-value='{"1":2,"2":"Hyundai Steel Co"}'>Hyundai Steel Co</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.94972}'>0.94972</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Steel"}'>Steel</td>
</tr>
<tr><td colspan="4" rowspan="1" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table>Below are the top 10 stocks suffering the harshest diversion on a 20-day moving average among those having a 180-day correlation coefficient of 0.80 or higher. E-Mart and Lotte Shopping top the list with a -3.27σ and a correlation coefficient of 0.85. Silicon Works/LG Electronics and BGF Retail/E-Mart follow as they are also in a heavy diversion at +2.79σ and +2.58σ, respectively. Woori Financial/KB Financial and Pan Ocean/HMM aren't far away either.<table class="table table-striped">
<colgroup>
<col width="200">
<col width="200">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Comp 1"}'>Comp 1</td>
<td data-sheets-value='{"1":2,"2":"Comp 2"}'>Comp 2</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"180-day correlation coefficient"}'>180-day correlation coefficient</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Sigma on a 20-day moving average"}'>Sigma on a 20-day moving average</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"E-Mart Inc"}'>E-Mart Inc</td>
<td data-sheets-value='{"1":2,"2":"Lotte Shopping Co Ltd"}'>Lotte Shopping Co Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.8512795053699035}' data-sheets-numberformat='[null,2,"#,##0.00000",1]'>0.85128</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-3.2691212591928522}' data-sheets-numberformat='{"1":2,"2":"#,##0.00","3":1}'>-3.27</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Silicon Works Co Ltd"}'>Silicon Works Co Ltd</td>
<td data-sheets-value='{"1":2,"2":"LG Electronics Inc."}'>LG Electronics Inc.</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.8241051481549174}' data-sheets-numberformat='{"1":2,"2":"#,##0.00000","3":1}'>0.82411</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2.794228170493331}' data-sheets-numberformat='{"1":2,"2":"#,##0.00","3":1}'>2.79</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"BGF Retail Co Ltd"}'>BGF Retail Co Ltd</td>
<td data-sheets-value='{"1":2,"2":"E-Mart Inc"}'>E-Mart Inc</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.847331528848073}' data-sheets-numberformat='{"1":2,"2":"#,##0.00000","3":1}'>0.84733</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2.5786176868102397}' data-sheets-numberformat='{"1":2,"2":"#,##0.00","3":1}'>2.58</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Woori Financial Group Inc"}'>Woori Financial Group Inc</td>
<td data-sheets-value='{"1":2,"2":"KB Financial Group Inc"}'>KB Financial Group Inc</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.8451741524292201}' data-sheets-numberformat='[null,2,"#,##0.00000",1]'>0.84517</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-2.465145723060455}' data-sheets-numberformat='{"1":2,"2":"#,##0.00","3":1}'>-2.47</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Pan Ocean Co Ltd"}'>Pan Ocean Co Ltd</td>
<td data-sheets-value='{"1":2,"2":"HMM Co Ltd"}'>HMM Co Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.935905540581882}' data-sheets-numberformat='[null,2,"#,##0.00000",1]'>0.93591</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-2.33130934144712}' data-sheets-numberformat='{"1":2,"2":"#,##0.00","3":1}'>-2.33</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Hyundai Mipo Dockyard Co., Ltd."}'>Hyundai Mipo Dockyard Co., Ltd.</td>
<td data-sheets-value='{"1":2,"2":"Korea Shipbuilding &amp;Offshore Engn Co Ltd"}'>Korea Shipbuilding &amp;Offshore Engn Co Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.9740462682980674}' data-sheets-numberformat='[null,2,"#,##0.00000",1]'>0.97405</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2.2401490556241117}' data-sheets-numberformat='{"1":2,"2":"#,##0.00","3":1}'>2.24</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"SK Innovation Co Ltd"}'>SK Innovation Co Ltd</td>
<td data-sheets-value='{"1":2,"2":"Samsung SDI Co Ltd"}'>Samsung SDI Co Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.9458691690353619}' data-sheets-numberformat='{"1":2,"2":"#,##0.00000","3":1}'>0.94587</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2.1867120471913637}' data-sheets-numberformat='{"1":2,"2":"#,##0.00","3":1}'>2.19</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Hanwha Aerospace Co Ltd"}'>Hanwha Aerospace Co Ltd</td>
<td data-sheets-value='{"1":2,"2":"Korea Aerospace Industries Ltd"}'>Korea Aerospace Industries Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.9524282780324967}' data-sheets-numberformat='[null,2,"#,##0.00000",1]'>0.95243</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2.086128932784612}' data-sheets-numberformat='{"1":2,"2":"#,##0.00","3":1}'>2.09</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Hyundai Mipo Dockyard Co., Ltd."}'>Hyundai Mipo Dockyard Co., Ltd.</td>
<td data-sheets-value='{"1":2,"2":"Daewoo Engineering &amp; Construction Co Ltd"}'>Daewoo Engineering &amp; Construction Co Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.8206840084895756}' data-sheets-numberformat='[null,2,"#,##0.00000",1]'>0.82068</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1.9737577992711182}' data-sheets-numberformat='{"1":2,"2":"#,##0.00","3":1}'>1.97</td>
</tr>
<tr>
<td>Woori Financial Group Inc</td>
<td>Shinhan Financial Group Co., Ltd.</td>
<td style="text-align: right;">0.87902</td>
<td style="text-align: right;">-1.93</td>
</tr>
<tr><td colspan="4" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table>

I grouped Korea's closely correlated sector pairs within the same GICS sub-category. I applied the additional filtering: 1. a market cap of ₩1T or more and 2. stocks eligible to short-selling (KOSPI 200 and KOSDAQ 150). This grouping returns 141 sector pairs worthy of close monitoring for a long/short trade.You can find all the 141 sector pairs with the 180-day correlation coefficients and the sigma on a 20-day moving average in the attached file.Below are the top 10 most correlated sector pairs above a 180-day correlation coefficient of 0.95 or higher. They are mostly cyclical stocks, which are in line with our conventional thinking that cyclical stocks have a stronger tendency to move together than growth stocks.








Comp 1
Comp 2
180-day correlation coefficient
Business type


Hyundai Mipo Dockyard Co., Ltd.
Korea Shipbuilding &amp;Offshore Engn Co Ltd
0.97405
Shipbuilding


Hyundai Department Store Co Ltd
Lotte Shopping Co Ltd
0.97033
Retail


GS Engineering &amp; Construction Corp
Hyundai Engineering &amp; Construction Co.
0.96379
Construction


HYUNDAI MOBIS CO., LTD.
Hyundai Motor Co
0.96145
Automotive


Shinhan Financial Group Co., Ltd.
KB Financial Group Inc
0.95989
Commercial bank


LG Innotek Co., Ltd.
LG Electronics Inc.
0.95986
IT


Hansol Chemical Co Ltd
Posco Chemical Co Ltd
0.95374
Chemical


Hanwha Aerospace Co Ltd
Korea Aerospace Industries Ltd
0.95243
Aerospace


KG DongbuSteel Co Ltd
POSCO
0.95174
Steel


KG DongbuSteel Co Ltd
Hyundai Steel Co
0.94972
Steel

Source: KRX

Below are the top 10 stocks suffering the harshest diversion on a 20-day moving average among those having a 180-day correlation coefficient of 0.80 or higher. E-Mart and Lotte Shopping top the list with a -3.27σ and a correlation coefficient of 0.85. Silicon Works/LG Electronics and BGF Retail/E-Mart follow as they are also in a heavy diversion at +2.79σ and +2.58σ, respectively. Woori Financial/KB Financial and Pan Ocean/HMM aren't far away either.








Comp 1
Comp 2
180-day correlation coefficient
Sigma on a 20-day moving average


E-Mart Inc
Lotte Shopping Co Ltd
0.85128
-3.27


Silicon Works Co Ltd
LG Electronics Inc.
0.82411
2.79


BGF Retail Co Ltd
E-Mart Inc
0.84733
2.58


Woori Financial Group Inc
KB Financial Group Inc
0.84517
-2.47


Pan Ocean Co Ltd
HMM Co Ltd
0.93591
-2.33


Hyundai Mipo Dockyard Co., Ltd.
Korea Shipbuilding &amp;Offshore Engn Co Ltd
0.97405
2.24


SK Innovation Co Ltd
Samsung SDI Co Ltd
0.94587
2.19


Hanwha Aerospace Co Ltd
Korea Aerospace Industries Ltd
0.95243
2.09


Hyundai Mipo Dockyard Co., Ltd.
Daewoo Engineering &amp; Construction Co Ltd
0.82068
1.97


Woori Financial Group Inc
Shinhan Financial Group Co., Ltd.
0.87902
-1.93

Source: KRX



Korea Sector Long/Short Pairs Trade Ideas

Quantitative Analysis

Doubleu Games leads KOSPI 200 stocks this morning with a 16% gain.It announced this morning that it would IPO one of its subsidiaries, Doubledown Interactive (mobile social gambling website), on NASDAQ as early as possible.Doubleu Games acquired Doubledown in 2017, which delivered ₩422.9B in sales last year, +33% YoY.HMM is making a move today with a 5% gain. It is mainly due to the news that HMM will begin to operate HMM Nuri, the first of eight 16000 TEU-class newbuild containerships.






Gainers
Daily Δ


Doubleu Games Co Ltd
16.26%


HMM Co Ltd
4.71%


GS Engineering &amp; Construction Corp
4.41%


Kolon Industries Inc
4.23%


POSCO
4.12%


Hansae Co., Ltd.
3.88%


Netmarble Corp
3.67%


Fila Holdings Corp
3.64%


HDC Hyundai Development Co
3.51%


SK Networks Co Ltd
2.81%


Huchems Fine Chemical Corporation
2.79%


Celltrion, Inc.
2.77%


LG Display Co Ltd
2.44%


Dong-A Socio Holdings Co Ltd
2.39%


Hanwha Solutions Corp
2.31%


Daewoo Engineering &amp; Construction Co Ltd
2.04%


Hyundai Engineering &amp; Construction Co.
1.86%


Ilyang Pharmaceutical Co., Ltd
1.59%


Halla Holdings Corp
1.58%


Kumho Petro Chemical Co Ltd
1.46%

Source: KRX

POSCO International is the biggest loser early today, mainly due to the concern over the gas pipe project in Myanmar.SKC follows with a 4.4% loss on its first trading day since the suspension following the prosecution’s indictment of SK Networks chairman on charges of embezzlement and a breach of trust.SKC's daily price volatility now sits at 11.2% of the opening.






Losers
Daily Δ


Posco International Corp
-4.42%


SKC Co Ltd
-4.39%


Chong Kun Dang Pharmaceutical Corp
-3.62%


LG Electronics Inc.
-3.23%


Doosan Infracore Co Ltd
-3.14%


Lotte Shopping Co Ltd
-2.73%


Cuckoo Holdings Co Ltd
-2.62%


Asiana Airlines Inc
-2.52%


Hanwha Aerospace Co Ltd
-2.45%


Hyundai Wia Corp
-2.42%


Youngpoong Corp
-2.19%


BGF Co Ltd
-2.19%


Shinsegae Inc
-2.13%


LIG Nex1 Co Ltd
-2.11%


KEPCO Engineering &amp; Construction Co Inc
-2.10%


BNK Financial Group Inc
-2.05%


Kumho Tire Co Inc
-2.04%


SNT MOTIV Co Ltd
-2.03%


Korea Aerospace Industries Ltd
-2.00%


Hyundai Green Food Co Ltd
-1.91%

Source: KRX

SKC, HMM, Pan Ocean, and Doosan Infracore are highly volatile in price early today.






x Open (daily price volatility)
Value


Doubleu Games Co Ltd
15.08%


SKC Co Ltd
11.21%


HMM Co Ltd
9.51%


Pan Ocean Co Ltd
7.71%


Doosan Infracore Co Ltd
7.32%


Hansae Co., Ltd.
6.36%


Bukwang Pharm Co Ltd
5.36%


Daewoo Engineering &amp; Construction Co Ltd
5.16%


Kolon Industries Inc
4.54%


Fila Holdings Corp
4.47%


Korea Aerospace Industries Ltd
4.44%


HDC Hyundai Development Co
4.37%


Hanwha Aerospace Co Ltd
4.37%


Lotte Shopping Co Ltd
4.28%


Oci Co Ltd
4.26%


Halla Holdings Corp
4.22%


LG Electronics Inc.
4.19%


SK Chemicals Co Ltd
4.14%


GS Engineering &amp; Construction Corp
4.14%


Netmarble Corp
4.05%

Source: KRX

Doubleu Games trading exploded, already at 13.87x DTV.Infracore continues to draw a lot of attention as its TV at this point already tripled 1M DTV.






TV/DTV (x)
Value


Doubleu Games Co Ltd
13.87


Doosan Infracore Co Ltd
3.52


SKC Co Ltd
2.55


Pan Ocean Co Ltd
1.79


HMM Co Ltd
1.64


Binggrae Co Ltd
1.55


Lotte Corp
1.51


GS Engineering &amp; Construction Corp
1.49


HDC Hyundai Development Co
1.21


SK Networks Co Ltd
1.20


Daewoo Engineering &amp; Construction Co Ltd
1.16


Lotte Fine Chemical Co Ltd
1.07


Fila Holdings Corp
1.04


Huchems Fine Chemical Corporation
1.00


SPC Samlip Co Ltd
0.96


Hyundai Engineering &amp; Construction Co.
0.95


Mando Corp
0.84


LG Display Co Ltd
0.76


Netmarble Corp
0.74


Korea Electric Power Corporation
0.72

Source: KRX



KOSPI 200 Daily Movers: Doubleu Games, HMM, SKC, & Doosan Infracore

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

The broad global indexes (MSCI ACWI, ACWI ex-US, and EAFE) remain near logical resistance as investors await monetary policy decisions from the ECB and Federal Reserve. Considering overhead resistance and continued mixed economic and market signals, we remain squarely in the neutral camp.  We outline important technical levels across major indexes and highlight attractive opportunities within the Manufacturing, Transportation, and Materials Sectors, most of which hail from Europe and Japan.

The broad global indexes (MSCI ACWI, ACWI ex-US, and EAFE) remain near logical resistance as investors await monetary policy decisions from the ECB and Federal Reserve. Considering overhead resistance and continued mixed economic and market signals, we remain squarely in the neutral camp.  We outline important technical levels across major indexes and highlight attractive opportunities within the Manufacturing, Transportation, and Materials Sectors, most of which hail from Europe and Japan.

Global Equity Strategy: Overhead Resistance Looms

CEO, A. Stotz Investment Research

Dr. Andrew Stotz, CFA

Quantamental Investing to beat Benchmarks

A. Stotz Investment Research

We pick stocks. We construct portfolios. All our effort is focused on how to better pick stocks and construct portfolios. We serve fund management companies, family offices, and high net worth individuals.

Equity Bottom-Up

<ul><li>Relatively strong analyst recommendation and earnings on an upcycle trend relative to its sector</li><li>Pan Ocean is well positioned for BDI hikes in 2018, with cost-competitive vessels and 50% of bulk sales coming from spot rate</li><li>The company could benefit from <a href="https://www.smartkarma.com/entities/24493" target="_blank" data-smartkarma-citation="entities:24493:1">Suzano Papel e Celulose SA (SUZB5 BZ)</a> acquisition of <a href="https://www.smartkarma.com/entities/24497" target="_blank" data-smartkarma-citation="entities:24497:1">Fibria Celulose SA (FIBR3 BZ)</a>, already a long-term client for 10 vessels, forming the largest cellulose company in the world</li><li>Trades at 18CE* 7.1% ROE/PB versus Asian Transportation at 6.1% and offers a solid balance sheet</li><li>Risks: Lower-than-expected demand caused by tax hikes</li></ul>* Consensus Estimates

Relatively strong analyst recommendation and earnings on an upcycle trend relative to its sectorPan Ocean is well positioned for BDI hikes in 2018, with cost-competitive vessels and 50% of bulk sales coming from spot rateThe company could benefit from Suzano Papel e Celulose SA (SUZB5 BZ) acquisition of Fibria Celulose SA (FIBR3 BZ), already a long-term client for 10 vessels, forming the largest cellulose company in the worldTrades at 18CE* 7.1% ROE/PB versus Asian Transportation at 6.1% and offers a solid balance sheetRisks: Lower-than-expected demand caused by tax hikes* Consensus Estimates

Pan Ocean (028670 KP): Well Positioned for BDI Hikes

Thematic (Sector/Industry)

Last month, foreign investors went on a buying spree in the Korea's second largest stock market, KOSDAQ. In contrast, they went on a selling spree in the Korea's largest stock market, KOSPI during the same period. This is very interesting since these foreign investors seem to be thinking that NPS initiated passive investing paradigm might have come to an end. In fact, foreign investors net purchased ₩536bil worth of KOSDAQ stocks in Sep alone. This is more than one fourth of their total net purchase from Jan to July. However, they net sold a total of ₩3.465tril worth of KOSPI stocks in the last two months. It seems clear that foreign investors' appetite has changed drastically in the last two months. That is, they are scooping up KOSDAQ stocks and dumping KOSPI stocks.<table class="table table-striped"><colgroup></colgroup><tbody><tr><td>(Shares, ₩)</td><td colspan="2">KOSDAQ</td><td colspan="2">KOSPI</td></tr><tr><td></td><td>Net trade volume</td><td>Net trade value</td><td>Net trade volume</td><td>Net trade value</td></tr><tr><td>Jan - July</td><td>-26,469,863</td><td>+2,036,022,065,002</td><td>303,361,818</td><td>+8,724,829,647,120</td></tr><tr><td>Aug</td><td>11,853,686</td><td>+276,445,341,427</td><td>15,985,082</td><td>-1,875,161,062,234</td></tr><tr><td>Sep</td><td>18,014,568</td><td>+535,789,044,679</td><td>-20,254,807</td><td>-1,589,880,870,918</td></tr><tr><td colspan="5">Source: KRX</td></tr></tbody></table>

Last month, foreign investors went on a buying spree in the Korea's second largest stock market, KOSDAQ. In contrast, they went on a selling spree in the Korea's largest stock market, KOSPI during the same period. This is very interesting since these foreign investors seem to be thinking that NPS initiated passive investing paradigm might have come to an end. In fact, foreign investors net purchased ₩536bil worth of KOSDAQ stocks in Sep alone. This is more than one fourth of their total net purchase from Jan to July. However, they net sold a total of ₩3.465tril worth of KOSPI stocks in the last two months. It seems clear that foreign investors' appetite has changed drastically in the last two months. That is, they are scooping up KOSDAQ stocks and dumping KOSPI stocks.(Shares, ₩)KOSDAQKOSPINet trade volumeNet trade valueNet trade volumeNet trade valueJan - July-26,469,863+2,036,022,065,002303,361,818+8,724,829,647,120Aug11,853,686+276,445,341,42715,985,082-1,875,161,062,234Sep18,014,568+535,789,044,679-20,254,807-1,589,880,870,918Source: KRX

Foreign Investors Vs. Local Institutions in Korean Stock Market - Who Is Right?

South Korea

Pan Ocean Co., Ltd. is a Korean shipping company that engages in marine transportation business. The Company provides bulk cargo carrier, pure car and truck carrier, container and tanker services.

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Pan Ocean (028670 KS)

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