Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<div class="content-highlight"><p>In this insight, we highlight the closing of the pricing gaps between the major Korean holdcos and opcos, especially with the upcoming end of the ban on the short selling of shares in Korea in May. In this insight, we highlight 26 pair trades that involve Korean holdcos and opcos.</p></div><p>Just a reminder that the ban on short selling of KOSPI 200 and KOSDAQ 150 included stocks will remain in place until May 2nd and investors will be able to resume their shorting on these 350 stocks starting on May 3rd. Once this ban on short selling of stocks ends, there could be more investors that may look to add to the holdco shares and short the opco shares (especially among the pairs where the holdco shares have underperformed the opco shares in the past year). However, some of these moves have already started to take place in the past few weeks, which could reduce the overall profits on the pair trades. </p><p>Traditionally, the pair trades involving Korean holdcos and opcos have been a trading strategy that many hedge funds have employed for many years. However, the ban on short selling of stocks in Korea have prevented many of these funds from employing these pair trade strategies. Once the ban ends, you will likely see these funds becoming more active in these trading methods once again. </p><div class="content-highlight">
<p>In the section below, we separated the pair trades into two different sections. The first table involves major opcos outperforming holdcos (regular and quasi) in the past year. Of the 26 pair trade strategies mentioned in this insight, this section I involves 19 of them (73% of total). The section II (which involve holdcos outperforming the opcos in the past year) involves 7 pair trade strategies (27% of total).</p>
<p>In other words, the opcos in general have vastly outperformed the holdcos in the past year, especially due to the ban on the short selling of stocks in Korea. Because the opcos tend to be the bigger company than the holdcos in terms of market cap, many fund managers (both active and passive) have tended to just invest in the opcos and pay less attention to the holdcos.  </p>
</div><p>Also, we described the holdcos as either regular or quasi. SK Telecom and Samsung C&amp;T would be examples of "quasi" holdcos whereas Orion Holdings and Hanjin Kal would be examples of regular holdcos. </p>

In this insight, we highlight the closing of the pricing gaps between the major Korean holdcos and opcos, especially with the upcoming end of the ban on the short selling of shares in Korea in May. In this insight, we highlight 26 pair trades that involve Korean holdcos and opcos.Just a reminder that the ban on short selling of KOSPI 200 and KOSDAQ 150 included stocks will remain in place until May 2nd and investors will be able to resume their shorting on these 350 stocks starting on May 3rd. Once this ban on short selling of stocks ends, there could be more investors that may look to add to the holdco shares and short the opco shares (especially among the pairs where the holdco shares have underperformed the opco shares in the past year). However, some of these moves have already started to take place in the past few weeks, which could reduce the overall profits on the pair trades. Traditionally, the pair trades involving Korean holdcos and opcos have been a trading strategy that many hedge funds have employed for many years. However, the ban on short selling of stocks in Korea have prevented many of these funds from employing these pair trade strategies. Once the ban ends, you will likely see these funds becoming more active in these trading methods once again. 
In the section below, we separated the pair trades into two different sections. The first table involves major opcos outperforming holdcos (regular and quasi) in the past year. Of the 26 pair trade strategies mentioned in this insight, this section I involves 19 of them (73% of total). The section II (which involve holdcos outperforming the opcos in the past year) involves 7 pair trade strategies (27% of total).
In other words, the opcos in general have vastly outperformed the holdcos in the past year, especially due to the ban on the short selling of stocks in Korea. Because the opcos tend to be the bigger company than the holdcos in terms of market cap, many fund managers (both active and passive) have tended to just invest in the opcos and pay less attention to the holdcos.  
Also, we described the holdcos as either regular or quasi. SK Telecom and Samsung C&amp;T would be examples of "quasi" holdcos whereas Orion Holdings and Hanjin Kal would be examples of regular holdcos. 

Closing the Gap: Korean Holdcos Vs. Opcos

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

<p>The review period 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> June review ends on 30 April. The Korea Exchange (KRX) will announce the results of the June 2021 review of 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> in May with the changes becoming effective after the close of trading on 10 June.</p><p>There are currently 201 index constituents following the spin off of <a href="https://www.smartkarma.com/entities/daelim-industrial-co-ltd" target="_blank" data-smartkarma-citation="entities:18095:1" rel="noopener">DL Co Ltd (000210 KS)</a> and the inclusion of <a href="https://www.smartkarma.com/entities/dl-e-c-co-ltd" target="_blank" data-smartkarma-citation="entities:31375:1" rel="noopener">DL E&amp;C Co Ltd (375500 KS)</a> in the index. There will be 202 index constituents following the spin off of <a href="https://www.smartkarma.com/entities/lg-corp" target="_blank" data-smartkarma-citation="entities:6653:1" rel="noopener">LG Corp (003550 KS)</a> and the inclusion of LX Holdings in the index.</p><p>We currently see 3 inclusions and 5 exclusions from the index. The potential inclusions are <a href="https://www.smartkarma.com/entities/hyosung-tnc-co-ltd" target="_blank" data-smartkarma-citation="entities:27749:1" rel="noopener">Hyosung TNC Co Ltd (298020 KS)</a>, <a href="https://www.smartkarma.com/entities/hyosung-advanced-materials-corporation" target="_blank" data-smartkarma-citation="entities:27751:1" rel="noopener">Hyosung Advanced Materials (298050 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>, while the potential deletions are <a href="https://www.smartkarma.com/entities/taeyoung-engineering-construction-co-ltd" target="_blank" data-smartkarma-citation="entities:18740:1" rel="noopener">Taeyoung Engineering &amp; Construction (009410 KS)</a>, <a href="https://www.smartkarma.com/entities/namsun-aluminum-co-ltd" target="_blank" data-smartkarma-citation="entities:17514:1" rel="noopener">Namsun Aluminum (008350 KS)</a>, <a href="https://www.smartkarma.com/entities/binggrae-co-ltd" target="_blank" data-smartkarma-citation="entities:16424:1" rel="noopener">Binggrae Co Ltd (005180 KS)</a>, <a href="https://www.smartkarma.com/entities/hanil-hyundai-cement-co-ltd" target="_blank" data-smartkarma-citation="entities:14406:1" rel="noopener">Hanil Hyundai Cement (006390 KS)</a> and <a href="https://www.smartkarma.com/entities/samyang-corp" target="_blank" data-smartkarma-citation="entities:16321:1" rel="noopener">Samyang Corp (145990 KS)</a>. </p><p>The expected Fast Entry of <a href="https://www.smartkarma.com/entities/sk-bioscience-co-ltd" target="_blank" data-smartkarma-citation="entities:31484:1" rel="noopener">SK Bioscience (302440 KS)</a> could result in <a href="https://www.smartkarma.com/entities/spc-samlip" target="_blank" data-smartkarma-citation="entities:6007:1" rel="noopener">SPC Samlip (005610 KS)</a> being deleted from the index.</p><p>The potential Fast Entry of <a href="https://www.smartkarma.com/entities/sk-ie-technology" target="_blank" data-smartkarma-citation="entities:29207:1" rel="noopener">SK IE Technology (SKIET KS)</a> could result in <a href="https://www.smartkarma.com/entities/aekyung-industrial-co-ltd" target="_blank" data-smartkarma-citation="entities:27129:1" rel="noopener">Aekyung Industrial Co Ltd (018250 KS)</a> being deleted from the index.</p><p><a href="https://www.smartkarma.com/entities/taihan-electric-wire-co-ltd" target="_blank" data-smartkarma-citation="entities:11551:1" rel="noopener">Taihan Electric Wire (001440 KS)</a> is a very close add - the next 5 trading days will decide if the stock is added to the index or not.</p><p>Short selling in Korea is scheduled to resume on 3 May and there could be a fair amount of movement in the stocks ahead of the index review announcement and implementation date.</p>

The review period for the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) June review ends on 30 April. The Korea Exchange (KRX) will announce the results of the June 2021 review of the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) in May with the changes becoming effective after the close of trading on 10 June.There are currently 201 index constituents following the spin off of DL Co Ltd (000210 KS) and the inclusion of DL E&amp;C Co Ltd (375500 KS) in the index. There will be 202 index constituents following the spin off of LG Corp (003550 KS) and the inclusion of LX Holdings in the index.We currently see 3 inclusions and 5 exclusions from the index. The potential inclusions are Hyosung TNC Co Ltd (298020 KS), Hyosung Advanced Materials (298050 KS) and Dongwon Industries (006040 KS), while the potential deletions are Taeyoung Engineering &amp; Construction (009410 KS), Namsun Aluminum (008350 KS), Binggrae Co Ltd (005180 KS), Hanil Hyundai Cement (006390 KS) and Samyang Corp (145990 KS). The expected Fast Entry of SK Bioscience (302440 KS) could result in SPC Samlip (005610 KS) being deleted from the index.The potential Fast Entry of SK IE Technology (SKIET KS) could result in Aekyung Industrial Co Ltd (018250 KS) being deleted from the index.Taihan Electric Wire (001440 KS) is a very close add - the next 5 trading days will decide if the stock is added to the index or not.Short selling in Korea is scheduled to resume on 3 May and there could be a fair amount of movement in the stocks ahead of the index review announcement and implementation date.

KOSPI200 Index Rebalance Preview: Review Period Almost Complete; Short Selling Commences in a Week

<p>The Korea Exchange (KRX) will announce the results of the June 2021 review of 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> in May with the changes becoming effective after the close of trading on 10 June.</p><p>Currently, we see <a href="https://www.smartkarma.com/entities/taihan-electric-wire-co-ltd" target="_blank" data-smartkarma-citation="entities:11551:1" rel="noopener">Taihan Electric Wire (001440 KS)</a> being included in the index and <a href="https://www.smartkarma.com/entities/taeyoung-engineering-construction-co-ltd" target="_blank" data-smartkarma-citation="entities:18740:1" rel="noopener">Taeyoung Engineering &amp; Construction (009410 KS)</a> being deleted, with a few stocks as close adds/ deletes. <a href="https://www.smartkarma.com/entities/taeyoung-engineering-construction-co-ltd" target="_blank" data-smartkarma-citation="entities:18740:1" rel="noopener">Taeyoung Engineering &amp; Construction (009410 KS)</a>'s expected deletion is a result of the demerger of TY Holdings (363280 KS) in September which has significantly lowered its market cap.</p><p><a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener">Krafton Inc (1486402D KS)</a>'s estimated market cap of US$26-30bn would see it included in the index as a Fast Entry if it lists before the end of April which would put <a href="https://www.smartkarma.com/entities/sebang-global-battery-co-ltd" target="_blank" data-smartkarma-citation="entities:9618:1" rel="noopener">Sebang Global Battery (004490 KS)</a> at risk of deletion. If Krafton lists by end January/ beginning February (seems unlikely at this point in time), it could be included in the KOSPI 200 in March. If it lists after mid Feb but before end April, Krafton could be included in the index at the June review.</p><p><a href="https://www.smartkarma.com/entities/taihan-electric-wire-co-ltd" target="_blank" data-smartkarma-citation="entities:11551:1" rel="noopener">Taihan Electric Wire (001440 KS)</a> has increased in price sharply over the last month and we would wait for the price to stabilize a bit before buying into the stock.</p>

The Korea Exchange (KRX) will announce the results of the June 2021 review of the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) in May with the changes becoming effective after the close of trading on 10 June.Currently, we see Taihan Electric Wire (001440 KS) being included in the index and Taeyoung Engineering &amp; Construction (009410 KS) being deleted, with a few stocks as close adds/ deletes. Taeyoung Engineering &amp; Construction (009410 KS)'s expected deletion is a result of the demerger of TY Holdings (363280 KS) in September which has significantly lowered its market cap.Krafton Inc (1486402D KS)'s estimated market cap of US$26-30bn would see it included in the index as a Fast Entry if it lists before the end of April which would put Sebang Global Battery (004490 KS) at risk of deletion. If Krafton lists by end January/ beginning February (seems unlikely at this point in time), it could be included in the KOSPI 200 in March. If it lists after mid Feb but before end April, Krafton could be included in the index at the June review.Taihan Electric Wire (001440 KS) has increased in price sharply over the last month and we would wait for the price to stabilize a bit before buying into the stock.

KOSPI200 Index Rebalance Preview: IPO Fast Entry & End of Short Sell Ban Will Shake Things Up

<div>
<p>The Korea Exchange (KRX) will announce the results of the December 2020 review of 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> in November. The constituent changes will be effective from 11 December 2020 and the rebalancing trades will need to be done at the closing auction on 10 December 2020.</p>
</div>
<div>
<p>In this Insight we look at the KOSPI 200 index methodology, the historical performance of inclusions vs exclusions, at potential candidates for inclusion/exclusion in this review and some of the details around the names.</p>
</div>
<div>
<p>At the current time, we see nine stocks being added to and deleted from the index with another three stocks as very close adds and deletes.</p>
<table class="table table-striped">
<colgroup> <col> <col> <col> <col> </colgroup>
<tbody>
<tr>
<td colspan="2" style="text-align: center; width: 162pt;">Potential Inclusions</td>
<td colspan="2" style="text-align: center; width: 167pt;">Potential Exclusions</td>
</tr>
<tr>
<td>039490.KS</td>
<td>KIWOOM Securities Co Ltd</td>
<td>000640.KS</td>
<td>Dong-A Socio Holdings Co Ltd</td>
</tr>
<tr>
<td>019170.KS</td>
<td>Shinpoong Pharmaceutical Co Ltd</td>
<td>145990.KS</td>
<td>Samyang Corp</td>
</tr>
<tr>
<td>005690.KS</td>
<td>Pharmicell Co Ltd</td>
<td>019680.KS</td>
<td>Daekyo Co Ltd</td>
</tr>
<tr>
<td>003090.KS</td>
<td>Daewoong Co Ltd</td>
<td>027410.KS</td>
<td>BGF Co Ltd</td>
</tr>
<tr>
<td>013890.KS</td>
<td>Zinus Inc</td>
<td>004490.KS</td>
<td>Sebang Global Battery Co Ltd</td>
</tr>
<tr>
<td>272210.KS</td>
<td>Hanwha Systems Co Ltd</td>
<td>002270.KS</td>
<td>Lotte Foods Co Ltd</td>
</tr>
<tr>
<td>336260.KS</td>
<td>Doosan Fuel Cell Co Ltd</td>
<td>093050.KS</td>
<td>LF Corp</td>
</tr>
<tr>
<td>003230.KS</td>
<td>Samyang Foods Co Ltd</td>
<td>060980.KS</td>
<td>Halla Holdings Corp</td>
</tr>
<tr>
<td>008350.KS</td>
<td>Namsun Aluminium Co Ltd</td>
<td>002240.KS</td>
<td>Kiswire Co Ltd</td>
</tr>
</tbody>
</table>
<p>Depending on where <a href="https://www.smartkarma.com/entities/sk-biopharmaceuticals-co-ltd" target="_blank" data-smartkarma-citation="entities:28966:1" rel="noopener">SK Biopharmaceuticals (BIO SK)</a> lists and the average market cap post 15 trading days, there could be a <a href="https://www.smartkarma.com/insights/sk-biopharmaceuticals-fast-index-entry-possibilities" target="_blank" rel="noopener">change</a> in 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> as early as September.</p>
</div>


The Korea Exchange (KRX) will announce the results of the December 2020 review of the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) in November. The constituent changes will be effective from 11 December 2020 and the rebalancing trades will need to be done at the closing auction on 10 December 2020.


In this Insight we look at the KOSPI 200 index methodology, the historical performance of inclusions vs exclusions, at potential candidates for inclusion/exclusion in this review and some of the details around the names.


At the current time, we see nine stocks being added to and deleted from the index with another three stocks as very close adds and deletes.

     


Potential Inclusions
Potential Exclusions


039490.KS
KIWOOM Securities Co Ltd
000640.KS
Dong-A Socio Holdings Co Ltd


019170.KS
Shinpoong Pharmaceutical Co Ltd
145990.KS
Samyang Corp


005690.KS
Pharmicell Co Ltd
019680.KS
Daekyo Co Ltd


003090.KS
Daewoong Co Ltd
027410.KS
BGF Co Ltd


013890.KS
Zinus Inc
004490.KS
Sebang Global Battery Co Ltd


272210.KS
Hanwha Systems Co Ltd
002270.KS
Lotte Foods Co Ltd


336260.KS
Doosan Fuel Cell Co Ltd
093050.KS
LF Corp


003230.KS
Samyang Foods Co Ltd
060980.KS
Halla Holdings Corp


008350.KS
Namsun Aluminium Co Ltd
002240.KS
Kiswire Co Ltd



Depending on where SK Biopharmaceuticals (BIO SK) lists and the average market cap post 15 trading days, there could be a change in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) as early as September.


KOSPI200 Index Rebalance Preview - Positioning Begins for December

Equity Capital Markets

<p>Samyang Packaging Corp, the largest PET bottles producer in Korea, is expected to complete its IPO in 4Q17. Korea Investment &amp; Securities is the lead banker for this IPO deal, which is likely to attract a strong demand by the institutional investors due to 1) attractive financials, 2) relatively high barriers to entry, and 3) a strong market share of 38% in the domestic PET industry. Samyang Packaging Corp started to produce PET bottles in 1986. <a href="https://www.smartkarma.com/entities/16321" target="_blank" data-smartkarma-citation="entities:16321:1">Samyang Corp (145990 KS)</a> owns a 51% stake in…</p>

Samyang Packaging Corp, the largest PET bottles producer in Korea, is expected to complete its IPO in 4Q17. Korea Investment &amp; Securities is the lead banker for this IPO deal, which is likely to attract a strong demand by the institutional investors due to 1) attractive financials, 2) relatively high barriers to entry, and 3) a strong market share of 38% in the domestic PET industry. Samyang Packaging Corp started to produce PET bottles in 1986. Samyang Corp (145990 KS) owns a 51% stake in…

Samyang Packaging Corp IPO Preview (Part 1)

South Korea

Samyang Corporation operates as a diversify company. The Company focuses on chemicals including engineering plastics with products such as industrial fibers, plastic bottle, ion exchange resins and also foodstuffs sector, including sugar, flour, baking mixes, vegetable oils, margarine, and shortening. Samyang Corporation market its products throughout South Korea.

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Samyang Corp (145990 KS)

Closing the Gap: Korean Holdcos Vs. Opcos

In this insight, we highlight the closing of the pricing gaps between the major Korean holdcos and opcos, especially with the upcoming end of the...

Douglas Kim

KOSPI200 Index Rebalance Preview: Review Period Almost Complete; Short Selling Commences in a Week

There could be up to 6 inclusions and 8 exclusions at the KOSPI200 index review in June. The inclusions could outperform the exclusions as short...

Brian Freitas

KOSPI200 Index Rebalance Preview: IPO Fast Entry & End of Short Sell Ban Will Shake Things Up

We just just one addition and deletion to the KOSPI200 index in the June 2021 review. The end of the short sell ban in March will bring a lot more...

Brian Freitas

KOSPI200 Index Rebalance Preview - Positioning Begins for December

The Korea Exchange (KRX) will announce the results of the December 2020 review of the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) in...

Brian Freitas

Samyang Packaging Corp IPO Preview (Part 1)

Samyang Packaging Corp, the largest PET bottles producer in Korea, is expected to complete its IPO in 4Q17. Korea Investment & Securities is...

Douglas Kim

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