Korea / Special Situations, Clepsydra Capital

Sanghyun Park

Korea / Special Situations

Event-Driven

Out of Korea's eight ADRs, POSCO ADR is currently at a 6.5% discount to the underlying share, whose price is up 3.14% today.The discount began to widen since yesterday to 3.2%, and now further gone down to 6.5%.POSCO ADRs account for 9.1% of the SO, making the DR market cap ₩1.47T. The ADR 30D DTV is ₩7.4B (US$6.3M), the second-highest behind SK Telecom. 











Status
US price (₩)
DR price ($)
US/DR
BER (₩)
DR price (₩)
DR prem


KB Financial Group, Inc.
37,450
31.86
1 to 1
1,165
37,148
-0.81%


LG Display Co Ltd.
15,800
6.94
1 to 2
1,165
16,184
2.37%


SK Telecom Co Ltd
237,500
22.63
1 to 9
1,165
237,477
-0.01%


Shinhan Financial Group Co., Ltd.
27,550
23.64
1 to 1
1,165
27,564
0.05%


Woori Financial Group Inc
8,320
21.53
3 to 1
1,165
8,368
0.57%


KT Corp
22,950
9.82
1 to 2
1,165
22,900
-0.22%


POSCO
197,500
39.76
1 to 4
1,165
185,439
-6.50%


Korea Electric Power Corporation
20,350
8.59
1 to 2
1,165
20,032
-1.59%

Source: KSD Seibro &amp; Google Finance













Premium
Today
T-1
T-2
T-3
T-4
T-5


KB Financial Group, Inc.
-0.81%
-1.56%
-0.49%
0.52%
0.08%
-0.32%


LG Display Co Ltd.
2.37%
-0.61%
0.58%
1.66%
1.62%
0.56%


SK Telecom Co Ltd
-0.01%
-1.48%
-0.24%
-0.21%
-0.05%
-0.27%


Shinhan Financial Group Co., Ltd.
0.05%
-2.34%
-1.09%
-0.25%
-0.30%
-1.62%


Woori Financial Group Inc
0.57%
-0.47%
0.62%
0.89%
0.80%
1.28%


KT Corp
-0.22%
-1.96%
-0.65%
0.79%
0.39%
0.07%


POSCO
-6.50%
-3.21%
-0.83%
1.47%
-0.04%
-0.32%


Korea Electric Power Corporation
-1.59%
-3.55%
-2.23%
0.33%
0.43%
-0.04%

Source: KSD Seibro &amp; Google Finance













Ticker, bourse, &amp; custodian
US ticker
US type
DR category
DR ticker
DR bourse
Custodian


KB Financial Group, Inc.
105560
Common
ADR
KB
NYSE
JPM


LG Display Co Ltd.
034220
Common
ADR
LPL
NYSE
Citi


SK Telecom Co Ltd
017670
Common
ADR
SKM
NYSE
Citi


Shinhan Financial Group Co., Ltd.
055550
Common
ADR
SHG
NYSE
Citi


Woori Financial Group Inc
316140
Common
ADR
WF
NYSE
Citi


KT Corp
030200
Common
ADR
KT
NYSE
Citi


POSCO
005490
Common
ADR
PKX
NYSE
Citi


Korea Electric Power Corporation
015760
Common
ADR
KEP
NYSE
Citi

Source: KSD Seibro













DR, % of cap &amp; SO
SO
US
DR
DR cap
% of cap
% of SO


KB Financial Group, Inc.
415,807,920
389,316,893
26,491,027
116,583,985
22.72%
6.37%


LG Display Co Ltd.
357,815,700
347,671,755
10,143,945
68,095,700
14.90%
2.83%


SK Telecom Co Ltd
80,745,711
72,763,690
7,982,021
24,321,893
32.82%
9.89%


Shinhan Financial Group Co., Ltd.
477,396,835
464,431,936
12,964,899
40,432,628
32.07%
2.72%


Woori Financial Group Inc
722,267,683
714,306,515
7,961,168
676,278,371
1.18%
1.10%


KT Corp
261,111,808
175,576,463
85,535,345
100,597,667
85.03%
32.76%


POSCO
87,186,835
79,241,995
7,944,840
27,000,000
29.43%
9.11%


Korea Electric Power Corporation
641,964,077
614,346,977
27,617,100
80,153,810
34.46%
4.30%

Source: KSD Seibro













DR MC &amp; DTV
DTV
SO
% of SO
MC (₩ B)
DTV (₩B)
DTV ($M)


KB Financial Group, Inc.
152,370
26,491,027
0.58%
984.1
5.7
4.9


LG Display Co Ltd.
203,724
10,143,945
2.01%
164.2
3.3
2.8


SK Telecom Co Ltd
34,823
7,982,021
0.44%
1,895.5
8.3
7.1


Shinhan Financial Group Co., Ltd.
138,292
12,964,899
1.07%
357.4
3.8
3.3


Woori Financial Group Inc
93,960
7,961,168
1.18%
66.6
0.8
0.7


KT Corp
255,059
85,535,345
0.30%
1,958.8
5.8
5.0


POSCO
39,859
7,944,840
0.50%
1,473.3
7.4
6.3


Korea Electric Power Corporation
59,769
27,617,100
0.22%
553.2
1.2
1.0

Source: KSD Seibro



POSCO ADR Is Now at a Hefty Discount (6.5%): Trading Dynamics

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

In this insight, we highlight seven major trading companies in Korea that could receive a greater positive boost from the global institutional investors who seek to find similar companies to the Japanese trading companies invested by Warren Buffett. The seven Korean trading companies mentioned in this insight have an average P/B multiple of 0.5x in 2020, which is 23% lower than the average P/B multiple of 0.7x for the five Japanese trading companies invested by Warren Buffett. These companies are as follows:<ul>
<li>Samsung C&amp;T</li>
<li>GS Corp</li>
<li>Hanwha Corp</li>
<li>POSCO International</li>
<li>SK Networks</li>
<li>LG International</li>
<li>Hyundai Corp</li>
</ul>

In this insight, we highlight seven major trading companies in Korea that could receive a greater positive boost from the global institutional investors who seek to find similar companies to the Japanese trading companies invested by Warren Buffett. The seven Korean trading companies mentioned in this insight have an average P/B multiple of 0.5x in 2020, which is 23% lower than the average P/B multiple of 0.7x for the five Japanese trading companies invested by Warren Buffett. These companies are as follows:
Samsung C&amp;T
GS Corp
Hanwha Corp
POSCO International
SK Networks
LG International
Hyundai Corp


Buffett's Investments in Japanese Trading Companies - Positive Boost to Korean Trading Companies?

Independent Asian Credit Research, Bondcritic

Warut Promboon

Independent Asian Credit Research

Asian Fixed Income/Frontier Market Research

Bondcritic

Bondcritic, established in 2009, is designed to be an independent credit research voice that helps investors gain insights and unbiased analyses on Asian fixed income market. Our mission is to discover deep-value Asian high-yield and distressed bonds with a bottom-up approach, together with the help of our proprietary ESG (Environmental, Social Development, and Governance) model. At the same time, we focus on bringing investment cases of unrated and unloved issuers to the general public.

Thematic (Sector/Industry)

In this Smartkarma Original, we seek to study how diversity and incentives influence stock performance and profitability. We tallied diversity and incentive data related to the board of directors, management, and employees across major economies in Asia and picked top 10 companies of each country in terms of market capitalization. We chose to exclude major companies listed in exchanges of other economies such as Tencent and Alibaba to limit our sample size.
Then we devised diversity and incentive scores to assign to those companies and compare those scores against a 5-year trend of their return on shareholders’ equity (ROE) ratios and 1-year stock performance from 1-July-19 to 30-June-20 over its corresponding exchange indices.
The report covers diversity vs. incentives in Asia, diversity score vs. 1-year stock performance and ROE trend, incentives vs. 1-year stock performance and ROE trend, diversity + incentives scores vs. 1-year stock performance and ROE trend, companies with top and bottom diversity + incentive scores, countries with top and bottom average diversity + incentive scores, and incentive score vs. staffing cost trend. 
The results show that companies with high diversity scores do perform well. A high diversity score also has a positive impact on the ROE trend, based on our regression analysis at 95% confidence level. We found that employee incentives are not significant as staff diversity but they can still have an influence on company performances at a lower 90% confidence level.
We note that this study is at the preliminary stage and stock performance is a function of many factors, not only the diversity scores that we concluded. Needless to say, our diversity and incentive scores also reflect the level of disclosures by selected companies, not necessarily the actual practice within each company. Our diversity and incentive scores are also not a credit rating or ranking with peers and, hence, do not reflect default probability of selected companies.
We caution that in Asia, many diversity trends in the West may not apply. The fact that many Asian business communities may remain less sensitive to equal opportunities for females, disabled persons, or LGBTQ communities could make returns of Asian companies less correlated to diversity than in the West. Likewise, additional incentives in some countries in Asia may not be necessary as employees’ strong performance (i.e. in Japan) is a norm, according to the prevalent work culture.
Bondcritic is developing a scoring model, which includes environment, social development, and corporate governance; the last of which cover diversity and incentives. This report is the first of the series to uncover shenanigans in the Asian corporate sector.

In this Smartkarma Original, we seek to study how diversity and incentives influence stock performance and profitability. We tallied diversity and incentive data related to the board of directors, management, and employees across major economies in Asia and picked top 10 companies of each country in terms of market capitalization. We chose to exclude major companies listed in exchanges of other economies such as Tencent and Alibaba to limit our sample size.
Then we devised diversity and incentive scores to assign to those companies and compare those scores against a 5-year trend of their return on shareholders’ equity (ROE) ratios and 1-year stock performance from 1-July-19 to 30-June-20 over its corresponding exchange indices.
The report covers diversity vs. incentives in Asia, diversity score vs. 1-year stock performance and ROE trend, incentives vs. 1-year stock performance and ROE trend, diversity + incentives scores vs. 1-year stock performance and ROE trend, companies with top and bottom diversity + incentive scores, countries with top and bottom average diversity + incentive scores, and incentive score vs. staffing cost trend. 
The results show that companies with high diversity scores do perform well. A high diversity score also has a positive impact on the ROE trend, based on our regression analysis at 95% confidence level. We found that employee incentives are not significant as staff diversity but they can still have an influence on company performances at a lower 90% confidence level.
We note that this study is at the preliminary stage and stock performance is a function of many factors, not only the diversity scores that we concluded. Needless to say, our diversity and incentive scores also reflect the level of disclosures by selected companies, not necessarily the actual practice within each company. Our diversity and incentive scores are also not a credit rating or ranking with peers and, hence, do not reflect default probability of selected companies.
We caution that in Asia, many diversity trends in the West may not apply. The fact that many Asian business communities may remain less sensitive to equal opportunities for females, disabled persons, or LGBTQ communities could make returns of Asian companies less correlated to diversity than in the West. Likewise, additional incentives in some countries in Asia may not be necessary as employees’ strong performance (i.e. in Japan) is a norm, according to the prevalent work culture.
Bondcritic is developing a scoring model, which includes environment, social development, and corporate governance; the last of which cover diversity and incentives. This report is the first of the series to uncover shenanigans in the Asian corporate sector.

Asian Governance: Diversity & Incentives Through the Cultural Lens

Two big drivers of the Korean stock market this year (especially since the lows in March 2020) have been the huge participation by local retail investors and the other major factor has been a big jump in the number of companies conducting share buybacks. In this insight, we discuss in detail the latter factor. As of 17 July 2020, there were 552 listed companies that have repurchased their shares or have announced that they will buy back shares since the beginning of the year. This represents a big jump of 4.2x as compared to the same period on a YoY basis.In this insight, we have identified 179 companies that have reported share buybacks from 1 June to 23 July 2020.

Two big drivers of the Korean stock market this year (especially since the lows in March 2020) have been the huge participation by local retail investors and the other major factor has been a big jump in the number of companies conducting share buybacks. In this insight, we discuss in detail the latter factor. As of 17 July 2020, there were 552 listed companies that have repurchased their shares or have announced that they will buy back shares since the beginning of the year. This represents a big jump of 4.2x as compared to the same period on a YoY basis.In this insight, we have identified 179 companies that have reported share buybacks from 1 June to 23 July 2020. 

Number of Companies Conducting Share Buybacks in Korea in 2020 YTD - A Big Jump of 4.2x YoY

<ul>
<li>One of the mysteries in the Korean stock market this year has been the underperformance of <a href="https://www.smartkarma.com/entities/samsung-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:191:1" rel="noopener">Samsung Electronics (005930 KS), </a>whose share price is down 11.7% YTD, underperforming KOSPI which is down 7.6% during the same period. In our view, one of the key reasons why Samsung Electronics has underperformed this year is due to the INCREASING CONCERNS ABOUT GREATER LABOR UNION INTERFERENCE on the company. </li>
<li>In November 2019, a<a href="https://koreajoongangdaily.joins.com/news/article/article.aspx?aid=3070394" target="_blank" rel="noopener"> first "major" union</a> was launched at Samsung Electronics, ending a period of 50+ years without a major union since the inception of the company more than 50 years ago. </li>
<li>The pro-union policy is something that Samsung Electronics has resisted for so many years. In fact, it was Lee Jae-Yong's grandfather and the founder of the Samsung Group <a href="https://www.upi.com/Top_News/World-News/2020/05/06/Samsung-heir-apologies-for-no-union-policy/4521588766924/" target="_blank" rel="noopener">Lee Byung-Chul</a> who once famously stated that "There will be no trade unions until he has dirt over his eyes.
</li>
</ul>


One of the mysteries in the Korean stock market this year has been the underperformance of Samsung Electronics (005930 KS), whose share price is down 11.7% YTD, underperforming KOSPI which is down 7.6% during the same period. In our view, one of the key reasons why Samsung Electronics has underperformed this year is due to the INCREASING CONCERNS ABOUT GREATER LABOR UNION INTERFERENCE on the company. 
In November 2019, a first "major" union was launched at Samsung Electronics, ending a period of 50+ years without a major union since the inception of the company more than 50 years ago. 
The pro-union policy is something that Samsung Electronics has resisted for so many years. In fact, it was Lee Jae-Yong's grandfather and the founder of the Samsung Group Lee Byung-Chul who once famously stated that "There will be no trade unions until he has dirt over his eyes.



Why Is Samsung Electronics Underperforming? ("No Trade Unions Until He Has Dirt Over His Eyes")

South Korea

POSCO Holdings Inc. manufactures and distributes steel products. The Company produces crude steel, hot rolled steel, cold rolled steel, stainless steel, steel plates, wire rods, galvanized steel, electrical steel, and other related products. POSCO Holdings markets its products worldwide.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

POSCO Holdings (005490 KS)

POSCO ADR Is Now at a Hefty Discount (6.5%): Trading Dynamics

???

Sanghyun Park

Buffett's Investments in Japanese Trading Companies - Positive Boost to Korean Trading Companies?

This is a follow up to Mio Kato's insight, A Quick Look at the Buffet Trade and the Most Obvious Follow-Ons. For many decades, Warren Buffett chose...

Douglas Kim

Asian Governance: Diversity & Incentives Through the Cultural Lens

In this Smartkarma Original, we seek to study how diversity and incentives influence stock performance and profitability. We tallied diversity and...

Bondcritic

Why Is Samsung Electronics Underperforming? ("No Trade Unions Until He Has Dirt Over His Eyes")

One of the mysteries in the Korean stock market this year has been the underperformance of Samsung Electronics (005930 KS), whose share price is...

Douglas Kim

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

POSCO ADR Is Now at a Hefty Discount (6.5%): Trading Dynamics

???

Sanghyun Park

Buffett's Investments in Japanese Trading Companies - Positive Boost to Korean Trading Companies?

This is a follow up to Mio Kato's insight, A Quick Look at the Buffet Trade and the Most Obvious Follow-Ons. For many decades, Warren Buffett chose...

Douglas Kim

Asian Governance: Diversity & Incentives Through the Cultural Lens

In this Smartkarma Original, we seek to study how diversity and incentives influence stock performance and profitability. We tallied diversity and...

Bondcritic

Number of Companies Conducting Share Buybacks in Korea in 2020 YTD - A Big Jump of 4.2x YoY

Two big drivers of the Korean stock market this year (especially since the lows in March 2020) have been the huge participation by local retail...

Douglas Kim

Why Is Samsung Electronics Underperforming? ("No Trade Unions Until He Has Dirt Over His Eyes")

One of the mysteries in the Korean stock market this year has been the underperformance of Samsung Electronics (005930 KS), whose share price is...

Douglas Kim