Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Event-Driven

<ul>
<li>Korea's local ETF market has experienced explosive growth in recent years. Over the past year, total ETF net assets have increased by 42%.</li>
<li>As a result, the flow impact they have on the market is growing significantly. So, we are now in great need to thoroughly investigates the local equity ETF market.</li>
<li>Hence, this post looks at the thematic ETFs, which are still somewhat overlooked by the market, thus providing uncrowded flow trading opportunities.</li>
</ul>


Korea's local ETF market has experienced explosive growth in recent years. Over the past year, total ETF net assets have increased by 42%.
As a result, the flow impact they have on the market is growing significantly. So, we are now in great need to thoroughly investigates the local equity ETF market.
Hence, this post looks at the thematic ETFs, which are still somewhat overlooked by the market, thus providing uncrowded flow trading opportunities.


A Guide to Thematic Equity ETFs in Korea for Uncrowded Flow Trading Opportunities

Samsung KODEX Top5Plus Total Return ETF / Event-Driven

<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>K200 ad hoc change announcement date should be March 30 as the buyback ends on March 28, and rebalancing trading should occur on March 31.</li>
<li>From a juice-level perspective, the entry point and timing for JB Financial showed much better performance from EGM approval rather than the announcement.</li>
<li>We should consider gradually building up positions from this point until March 30 announcement or one day after (T-1 effective) while utilizing Kodex Banks ETF to hedge our long positions.</li>
</ul>


K200 ad hoc change announcement date should be March 30 as the buyback ends on March 28, and rebalancing trading should occur on March 31.
From a juice-level perspective, the entry point and timing for JB Financial showed much better performance from EGM approval rather than the announcement.
We should consider gradually building up positions from this point until March 30 announcement or one day after (T-1 effective) while utilizing Kodex Banks ETF to hedge our long positions.


Meritz Merger Approved: Let's Now Discuss Key Dates & Entry Points For LONG DGB Financial

<ul>
<li>KOSPI 200 ETFs will have to sell Meritz FIRE and buy Meritz FINANCIAL at the close on January 27. JB Financial, the top reserved issue, will replace FIRE.</li>
<li>We should consider a Long Short for two Meritz companies just before the 27th. As a follow-up setup, we should aim for a potential widening of the swap arb spread.</li>
<li>As for the Long JB Financial, I would set the entry timing one week towards the implementation at the latest and look into Kodex Banks ETF (091170) for a hedge.</li>
</ul>


KOSPI 200 ETFs will have to sell Meritz FIRE and buy Meritz FINANCIAL at the close on January 27. JB Financial, the top reserved issue, will replace FIRE.
We should consider a Long Short for two Meritz companies just before the 27th. As a follow-up setup, we should aim for a potential widening of the swap arb spread.
As for the Long JB Financial, I would set the entry timing one week towards the implementation at the latest and look into Kodex Banks ETF (091170) for a hedge.


K200 ETFs' Swap Trading on Meritz & Fresh Buy-In JB Financial on Jan 27

<ul>
<li>Korea's ETF market achieved top-line growth last year as well. AUM increased by 7% YoY, a significant achievement considering that global ETF AUM has shrunk by 8%.</li>
<li>Since one-third of local ACTIVE ETFs are equity types (particularly SECTOR), we can conclude that the local equity ETF market has not shrunk but has migrated to ACTIVE.</li>
<li>Recently listed sector ETFs are expected to play an accelerating role in expanding the scope of these arb opportunities as they expand beyond electric vehicles/secondary batteries to groups/defense.</li>
</ul>


Korea's ETF market achieved top-line growth last year as well. AUM increased by 7% YoY, a significant achievement considering that global ETF AUM has shrunk by 8%.
Since one-third of local ACTIVE ETFs are equity types (particularly SECTOR), we can conclude that the local equity ETF market has not shrunk but has migrated to ACTIVE.
Recently listed sector ETFs are expected to play an accelerating role in expanding the scope of these arb opportunities as they expand beyond electric vehicles/secondary batteries to groups/defense.


Dissecting KRX Annual ETF Market Report & Noteworthy Trends for ETF Arbitrages

South Korea

Samsung KODEX Banks ETF is an Exchange Traded Fund established in South Korea. The Fund's objective is to provide investment return that corresponds closely to the performance of the KRX Banks Index.  The Fund invests in a portfolio that consists of the securities in the KRXBANK Index with full replication, in principle, or sampling method, when necessary.  

Samsung Kodex Banks ETF (091170 KS)

A Guide to Thematic Equity ETFs in Korea for Uncrowded Flow Trading Opportunities

This post looks at the thematic ETFs, which are still somewhat overlooked by the market, thus providing uncrowded flow trading opportunities.

Sanghyun Park

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

This post investigates arbitrage trading potential to capitalize on the tracking error widening in South Korean local ETFs.

Sanghyun Park

Meritz Merger Approved: Let's Now Discuss Key Dates & Entry Points For LONG DGB Financial

Entry points and key dates for long positions in DGB Financial following KOSPI 200 ad hoc change due to the Meritz merger

Sanghyun Park

K200 ETFs' Swap Trading on Meritz & Fresh Buy-In JB Financial on Jan 27

This post details the KOSPI 200 corporate actions on the Meritz merger on January 27 and discusses trading setups to consider for two Meritz...

Sanghyun Park

Dissecting KRX Annual ETF Market Report & Noteworthy Trends for ETF Arbitrages

This post provides vital takeaways that we should note in KRX's annual ETF market report released last week and discusses noteworthy trends that...

Sanghyun Park