Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Financials & FinTech research

Financials & FinTech, EM & Developed Markets

Galliano’s Financials Research

Galliano's Financials Research provides fundamental research in Emerging Markets financials, including FinTech, as well as financials in select Developed Markets.

The investment style applied is generally value oriented, although Growth At Reasonable Price (GARP) strategies can also be used where appropriate. 

Our investment research approach aim is often contrarian, looking to capitalise on overly sceptical or optimistic consensus views. In terms of valuation techniques, the focus is on PBV ratio to ROE, PE multiples and dividend yield, as well as the application of PEG ratios and, where appropriate, Sum of the Parts (SOTP) valuations.

Equity Bottom-Up

<ul>
<li>Six of the seven South Korean banks screen favourably on valuation versus returns metrics to June 2022; we like KB Financial, whilst Woori Financial is a wait and see story</li>
<li>KB has undemanding valuations, and one of the lowest PEG ratios; it delivers steady pre-provision returns, has sound core capital ratio of close to 13% and healthy credit quality ratios</li>
<li>Woori Financial and potentially KakaoBank are two names to review post 3Q22 results, with Woori and KakaoBank having seen their 2Q22 cost of risk rise sharply; we seek positive catalysts</li>
</ul>


Six of the seven South Korean banks screen favourably on valuation versus returns metrics to June 2022; we like KB Financial, whilst Woori Financial is a wait and see story
KB has undemanding valuations, and one of the lowest PEG ratios; it delivers steady pre-provision returns, has sound core capital ratio of close to 13% and healthy credit quality ratios
Woori Financial and potentially KakaoBank are two names to review post 3Q22 results, with Woori and KakaoBank having seen their 2Q22 cost of risk rise sharply; we seek positive catalysts


South Korean Banks Screener; KB Financial Is Our Core Pick

Research and consultancy, Tabbush Report

Daniel Tabbush

Research and consultancy

Tabbush Report

We provide research and consultancy on Asian banks. Our focus is on what we call “Asian bank research, without the noise.” We are interested in the most critical swing-factors for banks, the NPL and credit cycle, and where we believe there is a gap between perception and reality. We often focus on the less studied components of bank financial statements.  Our research is highly thematic, sometimes examining unlisted banks and companies as a window on mainstream banks. 

Being independent allows us to look at smaller banks, often overlooked by others. Analysis of BIS bank guidelines in the context of Asia, is also a focal point, while we also analyze global banks operating in the region. We use what we believe is the most comprehensive, reliable financials database, SNL Financial. S&P Capital IQ augments our database, with corporate data and CEIC, with economics. 

Asian bank research, without the noise.

Woori Financial Group  / Equity Bottom-Up

<ul>
<li>Woori is the fastest growing major bank in Korea, not positive into a downturn</li>
<li>Credit metrics look poor in granular data on loans and in credit costs</li>
<li>Capital levels are relatively low, while funding mix is worsening</li>
</ul>


Woori is the fastest growing major bank in Korea, not positive into a downturn
Credit metrics look poor in granular data on loans and in credit costs
Capital levels are relatively low, while funding mix is worsening


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

<ul>
<li>The index targets the GICS Financials/Banks sector stocks: 12 stocks belong to this sector. Then nine of these are currently included in the KRX Banks.</li>
<li>Compared to the last rebalancing, where we had Kakao Bank's inclusion event, the impact size for the upcoming rebalancing will likely be significantly reduced.</li>
<li>The last rebalancing showed that the directional correlation between passive flow and price movement was high. So, we can still consider a Long/Short Day Trade even with this impact size.</li>
</ul>


The index targets the GICS Financials/Banks sector stocks: 12 stocks belong to this sector. Then nine of these are currently included in the KRX Banks.
Compared to the last rebalancing, where we had Kakao Bank's inclusion event, the impact size for the upcoming rebalancing will likely be significantly reduced.
The last rebalancing showed that the directional correlation between passive flow and price movement was high. So, we can still consider a Long/Short Day Trade even with this impact size.


KRX Banks Index (KODEX ETF): September Rebalancing Preview

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

<ul>
<li>There are 7 adds and 7 deletes 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> rebalance to be implemented at the close on 9 June.</li>
<li>There are also a bunch of stocks that will have changes applied to their free float. There were announced last week and are much less tracked.</li>
<li>The flows and impact on some of the float change names are significant and pre-positioning and passive flows could move the stocks over the next few days.</li>
</ul>


There are 7 adds and 7 deletes for the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) rebalance to be implemented at the close on 9 June.
There are also a bunch of stocks that will have changes applied to their free float. There were announced last week and are much less tracked.
The flows and impact on some of the float change names are significant and pre-positioning and passive flows could move the stocks over the next few days.


KOSPI200 Index Rebalance: Float Changes, Flows & Trades

<ul>
<li>The KRX officially announced the float rate changes of the KOSPI 200 constituents at this June rebalancing: 11 increases and 5 decreases.</li>
<li>Kakao Bank has the most significant change of 43%p, followed by Krafton and Woori Financial. NH Investment and HD Infracore will suffer a drop of 9%p.</li>
<li>As for passive flow x ADTV, Kakao Bank leads the pack at 2.95x, followed by Kakao Pay (1.15x). NH Investment and Korea Gas will face a noticeable outflow.</li>
</ul>


The KRX officially announced the float rate changes of the KOSPI 200 constituents at this June rebalancing: 11 increases and 5 decreases.
Kakao Bank has the most significant change of 43%p, followed by Krafton and Woori Financial. NH Investment and HD Infracore will suffer a drop of 9%p.
As for passive flow x ADTV, Kakao Bank leads the pack at 2.95x, followed by Kakao Pay (1.15x). NH Investment and Korea Gas will face a noticeable outflow.


KOSPI 200 Official Announcement: Float Rate Changes (11 Up & 5 Down)

South Korea

Woori Financial Group Inc. provides commercial banking services. The Company offers deposit services, loan services, bill services, settlement services, credit card, international, online banking, and other related services. Woori Financial Group also operates banking and retail banking businesses.

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Woori Financial Group (316140 KS)

South Korean Banks Screener; KB Financial Is Our Core Pick

Of the seven South Korean banks, we like KB Financial for its attractive valuations, and low PEG ratio; it delivers steady pre-provision returns,...

Victor Galliano

Woori - Plenty to Worry About

Woori is the fastest growing back in recent years, so there is greater risk of unseasoned loans turning bad. The bank is less well provisioned, and...

Daniel Tabbush

KRX Banks Index (KODEX ETF): September Rebalancing Preview

This post previews the upcoming rebalancing of the KRX Banks Index, one of the KRX-owned thematic indexes with a meaningful AUM despite a small...

Sanghyun Park

KOSPI200 Index Rebalance: Float Changes, Flows & Trades

There are significant flows and impact on some stocks that have float changes at the upcoming KOSPI2 rebalance. With over 5 days ADV to buy,...

Brian Freitas

KOSPI 200 Official Announcement: Float Rate Changes (11 Up & 5 Down)

This post details the official results of the KOSPI 200 float rate changes in the upcoming June rebalancing, which will be effective next Friday.

Sanghyun Park

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