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

<p>As shown below, KRX BBIG consists of one mother index and four sub-indices. That is, a total of five individual indices each have their own ETF.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td style="width: 248.991px;" data-sheets-value='{"1":2,"2":"Index calculations"}'>Index calculations</td>
<td style="width: 191.989px;" data-sheets-value='{"1":2,"2":"BBIG"}'>BBIG (the mother index)</td>
<td style="width: 305.028px;" data-sheets-value='{"1":2,"2":"Four sub-indices"}'>
<div>Four sub-indices</div>
<div>: Secondary Battery, Bio, Internet, &amp; Game</div>
</td>
</tr>
<tr>
<td style="width: 248.991px;" data-sheets-value='{"1":2,"2":"Number of constituents"}'>Number of constituents</td>
<td style="width: 191.989px;" data-sheets-value='{"1":3,"3":12}' data-sheets-numberformat='{"1":2,"2":"#,##0"}'>12</td>
<td style="width: 305.028px;" data-sheets-value='{"1":3,"3":10}' data-sheets-numberformat='{"1":2,"2":"#,##0"}'>10</td>
</tr>
<tr>
<td colspan="1" rowspan="2" style="width: 248.991px;" data-sheets-value='{"1":2,"2":"Index weight"}'><div>Index weight</div></td>
<td colspan="1" rowspan="2" style="width: 191.989px;" data-sheets-value='{"1":2,"2":"Equal-weighted at 8.33%"}' data-sheets-numberformat='{"1":2,"2":"#,##0"}'><div>Equal-weighted at 8.33%</div></td>
<td colspan="1" rowspan="2" style="width: 305.028px;" data-sheets-value='{"1":2,"2":"Top 3 (by full market cap): Equal-weighted at 25%\nThe remaining 7: float-adjusted market cap-weighted totaling 25%"}' data-sheets-numberformat='{"1":2,"2":"#,##0"}'><div>Top 3 (by full market cap): Equal-weighted at 25%<br>The remaining 7: float-adjusted market-cap-weighted totaling 25%</div></td>
</tr>
<tr></tr>
<tr><td colspan="3" rowspan="1" style="width: 746.008px;" data-sheets-value='{"1":2,"2":"Source: KRX &amp; WISE Index"}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>Source: KRX &amp; WISE Index</td></tr>
</tbody>
</table><p>It is important to note that these indices consist of only 10 to 12 stocks. <strong>In addition, futures of the KRX BBIG mother index and two sub-indices (Secondary Battery and Bio) have been listed and operated since July of this year.</strong></p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/227/980/original/Screen+Shot+2021-09-05+at+3.22.23+AM.png?1630829541" class="editor-image img-responsive" data-smartkarma-image-id="227980"></figure></section><div class="content-highlight">
<p><strong>Hence, these indices provide relatively suitable conditions for ETF arbitrage.</strong></p>
<ul>
<li><strong>In other words, we can aim for arbitrage using an ETF/NAV disparity. In particular, in Korea, we get tax-free benefits (no transaction tax) when selling ETFs.</strong></li>
<li><strong>For this reason, if a disparity rises above -0.25% (equivalent to transaction tax rate), we can consider a classic ETF arb setup.</strong></li>
<li><strong>We buy underlying securities and undergo ETF creation and redemption in the primary and then sell ETFs in the secondary market.</strong></li>
</ul>
</div>

As shown below, KRX BBIG consists of one mother index and four sub-indices. That is, a total of five individual indices each have their own ETF.







Index calculations
BBIG (the mother index)

Four sub-indices
: Secondary Battery, Bio, Internet, &amp; Game



Number of constituents
12
10


Index weight
Equal-weighted at 8.33%
Top 3 (by full market cap): Equal-weighted at 25% The remaining 7: float-adjusted market-cap-weighted totaling 25%


Source: KRX &amp; WISE Index

It is important to note that these indices consist of only 10 to 12 stocks. In addition, futures of the KRX BBIG mother index and two sub-indices (Secondary Battery and Bio) have been listed and operated since July of this year.
Hence, these indices provide relatively suitable conditions for ETF arbitrage.

In other words, we can aim for arbitrage using an ETF/NAV disparity. In particular, in Korea, we get tax-free benefits (no transaction tax) when selling ETFs.
For this reason, if a disparity rises above -0.25% (equivalent to transaction tax rate), we can consider a classic ETF arb setup.
We buy underlying securities and undergo ETF creation and redemption in the primary and then sell ETFs in the secondary market.



ETF Arbitrage Using KRX BBIG New Deal Is on the Rise

<h2>Rebalancing results</h2><p>Below is the official result of the regular rebalancing in September for the KRX BBIG K_New Deal Index.</p><div class="content-highlight"><p><strong>Of course, the big changes are Krafton and SK Bioscience in the main index. And SKIET's inclusion in the Secondary Battery sub-index also deserves special attention.</strong></p></div><table class="table table-striped">
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<tbody>
<tr><td colspan="5" data-sheets-value='{"1":2,"2":"Constituents Change of KRX BBIG K-New Deal Index"}'>Constituents Change of KRX BBIG K-New Deal Index</td></tr>
<tr>
<td rowspan="2" data-sheets-value='{"1":2,"2":"Index"}'><div>Index</div></td>
<td colspan="2" style="text-align: center;" data-sheets-value='{"1":2,"2":"Addition"}'>Addition</td>
<td colspan="2" style="text-align: center;" data-sheets-value='{"1":2,"2":"Deletion"}'>Deletion</td>
</tr>
<tr>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"Ticker"}'>Ticker</td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"Name"}'>Name</td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"Ticker"}'>Ticker</td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"Name"}'>Name</td>
</tr>
<tr>
<td rowspan="2" data-sheets-value='{"1":2,"2":"KRX BBIG K_New Deal Index"}'><div><strong>KRX BBIG K_New Deal</strong></div></td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"302440"}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula='="302440"'><strong>302440</strong></td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"SK Bioscience Co Ltd"}' data-sheets-formula='=googlefinance(R[0]C[-1], "name")'><strong>SK Bioscience</strong></td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"302440"}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula='="302440"'><strong>302440</strong></td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"SK Bioscience Co Ltd"}' data-sheets-formula='=googlefinance(R[0]C[-1], "name")'><div><div><strong>SK Biopharm</strong></div></div></td>
</tr>
<tr>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"259960"}' data-sheets-formula='="259960"'><strong>259960</strong></td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"Krafton Inc"}' data-sheets-formula='=googlefinance(R[0]C[-1], "name")'><strong>Krafton</strong></td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"293490"}' data-sheets-formula='="293490"'><strong>293490</strong></td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"Kakao Games Corp"}' data-sheets-formula='=googlefinance(R[0]C[-1], "name")'><div><div><strong>Kakao Games</strong></div></div></td>
</tr>
<tr>
<td><div></div></td>
<td colspan="4" style="text-align: left;"><div><div></div></div></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"KRX Secondary Battery K_New Deal Index"}'><strong>KRX Secondary Battery</strong></td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"361610"}' data-sheets-formula='="361610"'><strong>361610</strong></td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"SK IE Technology Co Ltd"}' data-sheets-formula='=googlefinance(R[0]C[-1], "name")'><strong>SK IE Technology</strong></td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"278280"}' data-sheets-formula='="278280"'><strong>278280</strong></td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"Chunbo Co Ltd"}' data-sheets-formula='=googlefinance(R[0]C[-1], "name")'><strong>Chunbo</strong></td>
</tr>
<tr>
<td rowspan="2" data-sheets-value='{"1":2,"2":"KRX Bio K_New Deal Index"}'><div>KRX Bio</div></td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"302440"}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]' data-sheets-formula='="302440"'>302440</td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"SK Bioscience Co Ltd"}' data-sheets-formula='=googlefinance(R[0]C[-1], "name")'>SK Bioscience</td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"019170"}' data-sheets-formula='="019170"'>019170</td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"Shinpoong Pharmaceutical Co Ltd"}' data-sheets-formula='=googlefinance(R[0]C[-1], "name")'><div><div>Shinpoong Pharm</div></div></td>
</tr>
<tr>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"128940"}' data-sheets-formula='="128940"'>128940</td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"HanmiPharm"}' data-sheets-formula='=googlefinance(R[0]C[-1], "name")'>HanmiPharm</td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"096530"}' data-sheets-formula='="096530"'>096530</td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"Seegene Inc"}' data-sheets-formula='=googlefinance(R[0]C[-1], "name")'>Seegene</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"KRX Internet K_New Deal Index"}'>KRX Internet</td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"035600"}' data-sheets-formula='="035600"'>035600</td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"KGInicis Co Ltd"}' data-sheets-formula='=googlefinance(R[0]C[-1], "name")'>KGInicis</td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"131370"}' data-sheets-formula='="131370"'>131370</td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"Rsupport Co Ltd"}' data-sheets-formula='=googlefinance(R[0]C[-1], "name")'><div><div>Rsupport</div></div></td>
</tr>
<tr>
<td rowspan="2" data-sheets-value='{"1":2,"2":"KRX Game K_New Deal Index"}'><div>KRX Game</div></td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"259960"}' data-sheets-formula='="259960"'>259960</td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"Krafton Inc"}' data-sheets-formula='=googlefinance(R[0]C[-1], "name")'>Krafton</td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"112040"}' data-sheets-formula='="112040"'>112040</td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"Wemade Co Ltd"}' data-sheets-formula='=googlefinance(R[0]C[-1], "name")'>Wemade</td>
</tr>
<tr>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"194480"}' data-sheets-formula='="194480"'>194480</td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"Devsisters Corp"}' data-sheets-formula='=googlefinance(R[0]C[-1], "name")'>Devsisters</td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"217270"}' data-sheets-formula='="217270"'>217270</td>
<td style="text-align: left;" data-sheets-value='{"1":2,"2":"Neptune Co"}' data-sheets-formula='=googlefinance(R[0]C[-1], "name")'>Neptune</td>
</tr>
<tr><td colspan="5" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table><p><strong>The effective date is September 10, the same as the KOSPI 200 Fast Entry rebalancing. It means that Krafton will receive passive inflow from both KRX BBIG and KOSPI 200.</strong></p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
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<tbody>
<tr><td colspan="2" rowspan="1" style="width: 746.008px;" data-sheets-value='{"1":2,"2":"Rebalancing schedule"}'>Rebalancing schedule</td></tr>
<tr>
<td style="width: 212.997px;" data-sheets-value='{"1":2,"2":"Rebalancing cycle"}'>Rebalancing cycle</td>
<td style="width: 533.011px;" data-sheets-value='{"1":2,"2":"Semi-annually"}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>Semi-annually</td>
</tr>
<tr>
<td style="width: 212.997px;" data-sheets-value='{"1":2,"2":"Rebalancing month"}'>Rebalancing month</td>
<td style="width: 533.011px;" data-sheets-value='{"1":2,"2":"March and September"}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'><div>March and September</div></td>
</tr>
<tr>
<td style="width: 212.997px;" data-sheets-value='{"1":2,"2":"Implementation date"}'>Implementation date</td>
<td style="width: 533.011px;" data-sheets-value='{"1":2,"2":"The trading day following the last trading day for KOSPI 200 futures contracts"}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'><div>The trading day following the last trading day for KOSPI 200 futures contracts</div></td>
</tr>
<tr>
<td style="width: 212.997px;" data-sheets-value='{"1":2,"2":"Next implementation date"}'>Next implementation date</td>
<td style="width: 533.011px;" data-sheets-value='{"1":2,"2":"September 10, 2021"}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'><div>September 10, 2021</div></td>
</tr>
<tr>
<td style="width: 212.997px;" data-sheets-value='{"1":2,"2":"Rebalancing trading"}'>Rebalancing trading</td>
<td style="width: 533.011px;" data-sheets-value='{"1":2,"2":"At the close on September 9, 2021"}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'><div>At the close on September 9, 2021</div></td>
</tr>
<tr>
<td style="width: 212.997px;" data-sheets-value='{"1":2,"2":"Screening base date"}'>Screening base date</td>
<td style="width: 533.011px;" data-sheets-value='{"1":2,"2":"The last trading day of the month preceding the date of regular rebalancing"}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'><div>The last trading day of the month preceding the date of regular rebalancing.</div></td>
</tr>
<tr>
<td style="width: 212.997px;" data-sheets-value='{"1":2,"2":"Screening period"}'>Screening period</td>
<td style="width: 533.011px;" data-sheets-value='{"1":2,"2":"The three months preceding the screening base date"}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'><div>The three months preceding the screening base date</div></td>
</tr>
<tr><td colspan="2" rowspan="1" style="width: 746.008px;" data-sheets-value='{"1":2,"2":"Source: KRX &amp; WISE Index"}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>Source: KRX &amp; WISE Index</td></tr>
</tbody>
</table><p>Below are the AUMs of the ETFs tracking these indices. Only the main index and the secondary battery sub-index have a meaningful size of AUM. And both indices' AUMs have decreased from the peak in the first half of this year.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"ETFs tracking BBIG indices"}'>ETFs tracking BBIG indices</td>
<td data-sheets-value='{"1":2,"2":"Index"}'>Index</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Ticker"}'>Ticker</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"AUM"}'>AUM</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Mirae Asset TIGER KRX BBIG K-New Deal ETF"}' data-sheets-formula='=googlefinance(R[0]C[2], "name")'>Mirae Asset TIGER KRX BBIG K-New Deal ETF</td>
<td rowspan="4" data-sheets-value='{"1":2,"2":"KRX BBIG K-New Deal Index"}'><div><strong>KRX BBIG K-New Deal Index</strong></div></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":364960}'>364960</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":441.35}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[0]C[1]*R[0]C[2]/1000000000">₩441.4B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Hana Financial Investment Hana KRX BBIG K-New Deal ETN 3"}' data-sheets-formula='=googlefinance(R[0]C[2], "name")'>Hana Financial Investment Hana KRX BBIG K-New Deal ETN 3</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":700003}'>700003</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":10.31}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[0]C[1]*R[0]C[2]/1000000000">₩10.3B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"TIMEFOLIO TIMEFOLIO BBIG Active ETF"}' data-sheets-formula='=googlefinance(R[0]C[2], "name")'>TIMEFOLIO TIMEFOLIO BBIG Active ETF</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":385710}'>385710</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":27.564}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[0]C[1]*R[0]C[2]/1000000000">₩27.6B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"- Total"}' data-sheets-numberformat='[null,2,"#,##0.00",1]'><strong>- Total</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}'><strong>-</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":479.22400000000005}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=sum(R[-3]C[0]:R[-1]C[0])"><strong>₩479.2B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Mirae Asset TIGER KRX Second Battery K-NewDeal ETF"}' data-sheets-formula='=googlefinance(R[0]C[2], "name")'>Mirae Asset TIGER KRX Second Battery K-NewDeal ETF</td>
<td data-sheets-value='{"1":2,"2":"KRX Secondary Battery K-New Deal Index"}' data-sheets-numberformat='[null,2,"#,##0.0"]'><strong>KRX Secondary Battery K-New Deal Index</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":364980}'>364980</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":647.235}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[0]C[1]*R[0]C[2]/1000000000"><strong>₩647.2B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Mirae Asset TIGER KRX BIO K-New Deal ETF"}' data-sheets-formula='=googlefinance(R[0]C[2], "name")'>Mirae Asset TIGER KRX BIO K-New Deal ETF</td>
<td data-sheets-value='{"1":2,"2":"KRX Bio K-New Deal Index"}' data-sheets-numberformat='[null,2,"#,##0.0"]'><strong>KRX Bio K-New Deal Index</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":364970}'>364970</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":100.53}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[0]C[1]*R[0]C[2]/1000000000"><strong>₩100.5B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Mirae Asset TIGER KRX Internet K-New Deal ETF"}' data-sheets-formula='=googlefinance(R[0]C[2], "name")'>Mirae Asset TIGER KRX Internet K-New Deal ETF</td>
<td data-sheets-value='{"1":2,"2":"KRX Internet K-New Deal Index"}' data-sheets-numberformat='[null,2,"#,##0.0"]'><strong>KRX Internet K-New Deal Index</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":365000}'>365000</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":64.86725}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[0]C[1]*R[0]C[2]/1000000000"><strong>₩64.9B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Mirae Asset TIGER KRX Game K-New Deal ETF"}' data-sheets-formula='=googlefinance(R[0]C[2], "name")'>Mirae Asset TIGER KRX Game K-New Deal ETF</td>
<td data-sheets-value='{"1":2,"2":"KRX Game K-New Deal Index"}' data-sheets-numberformat='[null,2,"#,##0.0"]'><strong>KRX Game K-New Deal Index</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":364990}'>364990</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":31.89275}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[0]C[1]*R[0]C[2]/1000000000"><strong>₩31.9B</strong></td>
</tr>
<tr><td colspan="4">Source: KRX</td></tr>
</tbody>
</table><hr><h2>Regarding Krafton's inclusion:</h2><p>Krafton was listed after the review cutoff date (July 31). Nonetheless, KRX decided to include it in this rebalancing. Then, did KRX break its own rule? Well, it did not.</p><p><strong>Here is my explanation which I posted previously, concerning this issue.</strong></p><div class="content-highlight">
<p>First of all, this BBIG index does not have a Fast Entry clause. So, KRX was internally debating whether to apply the review cutoff date to newly listed stocks with large market caps. (This was what I heard from KRX directly.) Since this index has few constituents, if newly listed stocks with large market caps are excluded from the index for nearly six months, the resulting disparity between the index and the actual sector may become too large, and KRX is also concerned about this.</p>
<p>Therefore, KRX said that it would decide on Fast Entry of those stocks with large market caps, such as Krafton, Kakao Pay, and LG Energy Solution, at the time of regular rebalancing in consultation with the ETF operators (Mirae Asset). In the end, it turned out that the outcome of the KRX &amp; Mirae Asset discussion on the Fast Entry of Krafton was Go, which wasn't outside the scope of the KRX Index methodology at all.</p>
</div>

Rebalancing resultsBelow is the official result of the regular rebalancing in September for the KRX BBIG K_New Deal Index.Of course, the big changes are Krafton and SK Bioscience in the main index. And SKIET's inclusion in the Secondary Battery sub-index also deserves special attention.








Constituents Change of KRX BBIG K-New Deal Index

Index
Addition
Deletion


Ticker
Name
Ticker
Name


KRX BBIG K_New Deal
302440
SK Bioscience
302440
SK Biopharm


259960
Krafton
293490
Kakao Games






KRX Secondary Battery
361610
SK IE Technology
278280
Chunbo


KRX Bio
302440
SK Bioscience
019170
Shinpoong Pharm


128940
HanmiPharm
096530
Seegene


KRX Internet
035600
KGInicis
131370
Rsupport


KRX Game
259960
Krafton
112040
Wemade


194480
Devsisters
217270
Neptune

Source: KRX

The effective date is September 10, the same as the KOSPI 200 Fast Entry rebalancing. It means that Krafton will receive passive inflow from both KRX BBIG and KOSPI 200.





Rebalancing schedule

Rebalancing cycle
Semi-annually


Rebalancing month
March and September


Implementation date
The trading day following the last trading day for KOSPI 200 futures contracts


Next implementation date
September 10, 2021


Rebalancing trading
At the close on September 9, 2021


Screening base date
The last trading day of the month preceding the date of regular rebalancing.


Screening period
The three months preceding the screening base date

Source: KRX &amp; WISE Index

Below are the AUMs of the ETFs tracking these indices. Only the main index and the secondary battery sub-index have a meaningful size of AUM. And both indices' AUMs have decreased from the peak in the first half of this year.








ETFs tracking BBIG indices
Index
Ticker
AUM


Mirae Asset TIGER KRX BBIG K-New Deal ETF
KRX BBIG K-New Deal Index
364960
₩441.4B


Hana Financial Investment Hana KRX BBIG K-New Deal ETN 3
700003
₩10.3B


TIMEFOLIO TIMEFOLIO BBIG Active ETF
385710
₩27.6B


- Total
-
₩479.2B


Mirae Asset TIGER KRX Second Battery K-NewDeal ETF
KRX Secondary Battery K-New Deal Index
364980
₩647.2B


Mirae Asset TIGER KRX BIO K-New Deal ETF
KRX Bio K-New Deal Index
364970
₩100.5B


Mirae Asset TIGER KRX Internet K-New Deal ETF
KRX Internet K-New Deal Index
365000
₩64.9B


Mirae Asset TIGER KRX Game K-New Deal ETF
KRX Game K-New Deal Index
364990
₩31.9B

Source: KRX

Regarding Krafton's inclusion:Krafton was listed after the review cutoff date (July 31). Nonetheless, KRX decided to include it in this rebalancing. Then, did KRX break its own rule? Well, it did not.Here is my explanation which I posted previously, concerning this issue.
First of all, this BBIG index does not have a Fast Entry clause. So, KRX was internally debating whether to apply the review cutoff date to newly listed stocks with large market caps. (This was what I heard from KRX directly.) Since this index has few constituents, if newly listed stocks with large market caps are excluded from the index for nearly six months, the resulting disparity between the index and the actual sector may become too large, and KRX is also concerned about this.
Therefore, KRX said that it would decide on Fast Entry of those stocks with large market caps, such as Krafton, Kakao Pay, and LG Energy Solution, at the time of regular rebalancing in consultation with the ETF operators (Mirae Asset). In the end, it turned out that the outcome of the KRX &amp; Mirae Asset discussion on the Fast Entry of Krafton was Go, which wasn't outside the scope of the KRX Index methodology at all.


KRX BBIG Rebalancing Results & Passive Impact Estimations: Watch Douzone Bizon

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

<p>The KRX has announced the results of the September review of the BBIG indices and the changes will become effective after the close of trading on 9 September.</p><p>These are the changes to the indices:</p><ul style="list-style-type: disc;">
<li>Secondary Battery ETF: <a href="https://www.smartkarma.com/entities/sk-ie-technology" target="_blank" data-smartkarma-citation="entities:29207:1" rel="noopener">SK IE Technology (361610 KS)</a> replaces <a href="https://www.smartkarma.com/entities/chunbo-co-ltd" target="_blank" data-smartkarma-citation="entities:27848:1" rel="noopener">Chunbo Co Ltd (278280 KS)</a>
</li>
<li>Bio ETF: <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> and <a href="https://www.smartkarma.com/entities/hanmi-pharm-co-ltd" target="_blank" data-smartkarma-citation="entities:12476:1" rel="noopener">Hanmi Pharm (128940 KS)</a> join the index, replacing <a href="https://www.smartkarma.com/entities/shinpoong-pharmaceutical-co-ltd" target="_blank" data-smartkarma-citation="entities:7296:1" rel="noopener">Shinpoong Pharmaceutical (019170 KS)</a> and <a href="https://www.smartkarma.com/entities/seegene-inc" target="_blank" data-smartkarma-citation="entities:11483:1" rel="noopener">Seegene Inc (096530 KS)</a>. Additionally, <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> replaces <a href="https://www.smartkarma.com/entities/sk-biopharmaceuticals-co-ltd" target="_blank" data-smartkarma-citation="entities:28966:1" rel="noopener">SK Biopharmaceuticals Co Ltd (326030 KS)</a> in the top 3 stocks.</li>
<li>Internet ETF: <a href="https://www.smartkarma.com/entities/kg-inicis-co-ltd" target="_blank" data-smartkarma-citation="entities:5234:1" rel="noopener">KG Inicis Co Ltd (035600 KS)</a> replaces <a href="https://www.smartkarma.com/entities/rsupport-co-ltd" target="_blank" data-smartkarma-citation="entities:14783:1" rel="noopener">Rsupport Co Ltd (131370 KS)</a> </li>
<li>Game ETF: <a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960 KS)</a> and <a href="https://www.smartkarma.com/entities/devsisters-co-ltd" target="_blank" data-smartkarma-citation="entities:14096:1" rel="noopener">Devsisters (194480 KS)</a> replace <a href="https://www.smartkarma.com/entities/wemade-co-ltd" target="_blank" data-smartkarma-citation="entities:9940:1" rel="noopener">Wemade Co., Ltd. (112040 KS)</a> and <a href="https://www.smartkarma.com/entities/neptune-company" target="_blank" data-smartkarma-citation="entities:28826:1" rel="noopener">Neptune Company (217270 KS)</a>
</li>
<li>BBIG ETF: <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> and <a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960 KS)</a> replace <a href="https://www.smartkarma.com/entities/sk-biopharmaceuticals-co-ltd" target="_blank" data-smartkarma-citation="entities:28966:1" rel="noopener">SK Biopharmaceuticals Co Ltd (326030 KS)</a> and <a href="https://www.smartkarma.com/entities/kakao-games-corp" target="_blank" data-smartkarma-citation="entities:26730:1" rel="noopener">Kakao Games Corp (293490 KS)</a>.</li>
</ul><p>KRX has broken its own rules (everyone does it, so join in!) by including <a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960 KS)</a> even though the stock listed post the July-end cut off and there is no provision of Fast Entry in the index methodology.</p><p>Stocks with the largest inflows are <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>, <a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960 KS)</a>, <a href="https://www.smartkarma.com/entities/sk-ie-technology" target="_blank" data-smartkarma-citation="entities:29207:1" rel="noopener">SK IE Technology (361610 KS)</a>, <a href="https://www.smartkarma.com/entities/lg-chem-ltd" target="_blank" data-smartkarma-citation="entities:3583:1" rel="noopener">LG Chem Ltd (051910 KS)</a>, <a href="https://www.smartkarma.com/entities/sk-innovation-co-ltd" target="_blank" data-smartkarma-citation="entities:1268:1" rel="noopener">SK Innovation (096770 KS)</a> and <a href="https://www.smartkarma.com/entities/douzone-bizon-co-ltd" target="_blank" data-smartkarma-citation="entities:20161:1" rel="noopener">Douzone Bizon (012510 KS)</a> while the stocks with the largest outflows are <a href="https://www.smartkarma.com/entities/kakao-games-corp" target="_blank" data-smartkarma-citation="entities:26730:1" rel="noopener">Kakao Games Corp (293490 KS)</a>, <a href="https://www.smartkarma.com/entities/sk-biopharmaceuticals-co-ltd" target="_blank" data-smartkarma-citation="entities:28966:1" rel="noopener">SK Biopharmaceuticals Co Ltd (326030 KS)</a>, <a href="https://www.smartkarma.com/entities/kakao-corp" target="_blank" data-smartkarma-citation="entities:15002:1" rel="noopener">Kakao Corp (035720 KS)</a>, <a href="https://www.smartkarma.com/entities/posco-chemical-co-ltd" target="_blank" data-smartkarma-citation="entities:12421:1" rel="noopener">Posco Chemical Co Ltd (003670 KS)</a>, <a href="https://www.smartkarma.com/entities/skc-co-ltd" target="_blank" data-smartkarma-citation="entities:3970:1" rel="noopener">SKC Co Ltd (011790 KS)</a> and <a href="https://www.smartkarma.com/entities/samsung-sdi-co-ltd" target="_blank" data-smartkarma-citation="entities:503:1" rel="noopener">Samsung SDI (006400 KS)</a>.</p><p><a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960 KS)</a> is also a Fast Entry to 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> and there will be passive buying from those trackers as well.</p>

The KRX has announced the results of the September review of the BBIG indices and the changes will become effective after the close of trading on 9 September.These are the changes to the indices:
Secondary Battery ETF: SK IE Technology (361610 KS) replaces Chunbo Co Ltd (278280 KS)

Bio ETF: SK Bioscience (302440 KS) and Hanmi Pharm (128940 KS) join the index, replacing Shinpoong Pharmaceutical (019170 KS) and Seegene Inc (096530 KS). Additionally, SK Bioscience (302440 KS) replaces SK Biopharmaceuticals Co Ltd (326030 KS) in the top 3 stocks.
Internet ETF: KG Inicis Co Ltd (035600 KS) replaces Rsupport Co Ltd (131370 KS) 
Game ETF:  Krafton Inc (259960 KS) and Devsisters (194480 KS) replace Wemade Co., Ltd. (112040 KS) and Neptune Company (217270 KS)

BBIG ETF: SK Bioscience (302440 KS) and  Krafton Inc (259960 KS) replace SK Biopharmaceuticals Co Ltd (326030 KS) and Kakao Games Corp (293490 KS).
KRX has broken its own rules (everyone does it, so join in!) by including  Krafton Inc (259960 KS) even though the stock listed post the July-end cut off and there is no provision of Fast Entry in the index methodology.Stocks with the largest inflows are SK Bioscience (302440 KS),  Krafton Inc (259960 KS), SK IE Technology (361610 KS), LG Chem Ltd (051910 KS), SK Innovation (096770 KS) and Douzone Bizon (012510 KS) while the stocks with the largest outflows are Kakao Games Corp (293490 KS), SK Biopharmaceuticals Co Ltd (326030 KS), Kakao Corp (035720 KS), Posco Chemical Co Ltd (003670 KS), SKC Co Ltd (011790 KS) and Samsung SDI (006400 KS). Krafton Inc (259960 KS) is also a Fast Entry to the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) and there will be passive buying from those trackers as well.

KRX BBIG Index Rebalance: Krafton, SK Bioscience, SK IE Tech Included (Among Others)

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<p>In this insight, we discuss a major study in Israel that suggests that a person's natural immunity provides 13x higher protection against the Delta variant than the COVID-19 vaccines themselves. In particular, we discuss the implication of this study on SK Bioscience which is the Bill Gates foundation backed, largest COVID-19 vaccine related player in Korea. SK Bioscience has won deals to contract manufacture COVID-19 vaccines developed by the UK‘s AstraZeneca and US’ Novavax. </p><p><strong>Why is Israel so important?</strong> Israel is so important since it has been one of the leading countries globally to vaccinate most of its people against COVID-19. Israel has a population of 9.1 million people. A total of 13.3 million doses of COVID-19 vaccines have been given and a 5.5 million people in Israel are fully vaccinated (2 jabs of vaccinations), representing 60.4% of the the total population that are fully vaccinated.</p><div class="content-highlight"><p><strong>According to this <a href="https://www.sciencemag.org/news/2021/08/having-sars-cov-2-once-confers-much-greater-immunity-vaccine-no-infection-parties" target="_blank" rel="noopener">study,</a> it found that those people in Israel that were vaccinated with two doses of Pfizer-BioNTech COVID-19 vaccine were 6 to 13 times more likely to get infected from the COVID-19 virus than the unvaccinated people who were previously infected with the COVID-19 virus. </strong></p></div>

In this insight, we discuss a major study in Israel that suggests that a person's natural immunity provides 13x higher protection against the Delta variant than the COVID-19 vaccines themselves. In particular, we discuss the implication of this study on SK Bioscience which is the Bill Gates foundation backed, largest COVID-19 vaccine related player in Korea. SK Bioscience has won deals to contract manufacture COVID-19 vaccines developed by the UK‘s AstraZeneca and US’ Novavax. Why is Israel so important? Israel is so important since it has been one of the leading countries globally to vaccinate most of its people against COVID-19. Israel has a population of 9.1 million people. A total of 13.3 million doses of COVID-19 vaccines have been given and a 5.5 million people in Israel are fully vaccinated (2 jabs of vaccinations), representing 60.4% of the the total population that are fully vaccinated.According to this study, it found that those people in Israel that were vaccinated with two doses of Pfizer-BioNTech COVID-19 vaccine were 6 to 13 times more likely to get infected from the COVID-19 virus than the unvaccinated people who were previously infected with the COVID-19 virus. 

A Major Study in Israel Suggests Natural Immunity Provides 13x Higher Protection than COVID Vaccine

<p><strong>In this insight, we provide an NAV valuation sensitivity analysis of SK Chemicals. SK Chemicals has an 68.4% stake in <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> which is worth 17.6 trillion won versus SK Chemicals' current market cap of 3.4 trillion won. </strong></p><ul>
<li>In Case A, we used the current market value of SK Bioscience. In the NAV analysis Case A, it suggests a target price of 766,134 won, which is 168% higher than current price.</li>
<li>In Case B, we used the average of the high/low value of SK Bioscience's share price in the past five months. In the NAV analysis Case B, it suggests a target price of 546,265 won, which is 91% higher than the current price.</li>
<li>In Case C, we used the low price of SK Bioscience in the past five months. In the NAV analysis Case C, it suggests a target price of 267,389 won, which is 6.5% lower than the current price.</li>
</ul><div class="content-highlight">
<p>Clearly, SK Chemicals is trading at a steep discount to its NAV. Part of this reason may be because the market may not be fully willing to reflect SK Bioscience's current market value on its controlling stake. Since its IPO in March 2021, SK Bioscience has been a huge winner and it has also vastly outperformed against SK Chemicals.</p>
<p>However, there appears to be too much valuation gap between these two companies and in the coming months, we believe that there is a higher probability of SK Chemicals outperforming versus SK Bioscience, especially as the value investors try to pick up on SK Chemicals whose market cap is only 19% of its stake in SK Bioscience. </p>
</div>

In this insight, we provide an NAV valuation sensitivity analysis of SK Chemicals. SK Chemicals has an 68.4% stake in SK Bioscience (302440 KS) which is worth 17.6 trillion won versus SK Chemicals' current market cap of 3.4 trillion won. 
In Case A, we used the current market value of SK Bioscience. In the NAV analysis Case A, it suggests a target price of 766,134 won, which is 168% higher than current price.
In Case B, we used the average of the high/low value of SK Bioscience's share price in the past five months. In the NAV analysis Case B, it suggests a target price of 546,265 won, which is 91% higher than the current price.
In Case C, we used the low price of SK Bioscience in the past five months. In the NAV analysis Case C, it suggests a target price of 267,389 won, which is 6.5% lower than the current price.

Clearly, SK Chemicals is trading at a steep discount to its NAV. Part of this reason may be because the market may not be fully willing to reflect SK Bioscience's current market value on its controlling stake. Since its IPO in March 2021, SK Bioscience has been a huge winner and it has also vastly outperformed against SK Chemicals.
However, there appears to be too much valuation gap between these two companies and in the coming months, we believe that there is a higher probability of SK Chemicals outperforming versus SK Bioscience, especially as the value investors try to pick up on SK Chemicals whose market cap is only 19% of its stake in SK Bioscience. 


SK Chemicals - Its Market Cap Is Only 19% of Its Stake in SK Bioscience

South Korea

SK Bioscience Co.,Ltd. operates biopharmaceutical businesses. The Company produces vaccines, sky cellflu prefilled syringes, sky cellflu quadrivalent prefilled syringes, varicella drugs, and other related products. SK Bioscience markets its products throughout South Korea.

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SK Bioscience (302440 KS)

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Douglas Kim

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