Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<ul>
<li>In this insight, we discuss the potential inclusions and exclusions that the locals are highlighting for the KOSPI 200 and KOSDAQ 150 rebalance in May 2023. </li>
<li>The top five best performing stocks YTD that are expected to be included in either KOSPI200 and KOSDAQ150 include Rainbow Robotics, Kumyang, Cosmo Chemical, Yunsung F&amp;C, and Posco M Tech.</li>
<li>In the coming weeks, there is a higher probability these five stocks underperform the market on average as many investors sell the news on them getting included in these indices. </li>
</ul>


In this insight, we discuss the potential inclusions and exclusions that the locals are highlighting for the KOSPI 200 and KOSDAQ 150 rebalance in May 2023. 
The top five best performing stocks YTD that are expected to be included in either KOSPI200 and KOSDAQ150 include Rainbow Robotics, Kumyang, Cosmo Chemical, Yunsung F&amp;C, and Posco M Tech.
In the coming weeks, there is a higher probability these five stocks underperform the market on average as many investors sell the news on them getting included in these indices. 


Potential Inclusions & Exclusions for KOSPI 200 and KOSDAQ 150 in May 2023 Highlighted by Locals

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.

<ul>
<li>Dongwon Industries’ float rate is less than 10% (1 - 63.15% - 27.65% = 9.20%), which makes it ineligible for KOSPI 200. KRX will reflect this in the June review.</li>
<li>The passive outflow size due to K200 deletion is expected to be about 50 billion won, which will cause an impact of about 28x ADTV.</li>
<li>Considering this deletion has not been sufficiently exposed in the market, the actual price impact may be even more significant and preemptive.</li>
</ul>


Dongwon Industries’ float rate is less than 10% (1 - 63.15% - 27.65% = 9.20%), which makes it ineligible for KOSPI 200. KRX will reflect this in the June review.
The passive outflow size due to K200 deletion is expected to be about 50 billion won, which will cause an impact of about 28x ADTV.
Considering this deletion has not been sufficiently exposed in the market, the actual price impact may be even more significant and preemptive.


Aggressive Shorting on Dongwon Industries, Which Has Not Been Noticed as a K200 Deletion

<ul>
<li>DGB Financial Group's market cap makes it virtually impossible to get deleted even with Kakao Pay's GICS change in this June rebalancing.</li>
<li>It's unclear whether this has damaged the price impact of K200 inclusion. Nevertheless, the intensity of the pre-rebalancing flow wasn't aggressive, possibly due to the combination of factors, including this.</li>
<li>This suggests the possibility of an intense price impact resulting from a more concentrated flow right before the effective date, so we should prepare a setup that considers this.</li>
</ul>


DGB Financial Group's market cap makes it virtually impossible to get deleted even with Kakao Pay's GICS change in this June rebalancing.
It's unclear whether this has damaged the price impact of K200 inclusion. Nevertheless, the intensity of the pre-rebalancing flow wasn't aggressive, possibly due to the combination of factors, including this.
This suggests the possibility of an intense price impact resulting from a more concentrated flow right before the effective date, so we should prepare a setup that considers this.


Clarifying Market's Inaccurate Constituent Change Forecast in K200 Rebalancing with GICS Revision

Equity Bottom-Up

<ul>
<li>Amid sharply rising interest rates and greater economic uncertainty, the subject of loan guarantees to affiliates among Korean companies has become more important. </li>
<li>In this insight, we discuss a pair trade between Shinsegae (long) and Hyundai Dept Store Co (short).</li>
<li>Four major reasons why we prefer Shinsegae vs Hyundai Dept Store include negative impact from equity spin-off, increasing leverage (including loan guarantees), valuations, and economies of scale. </li>
</ul>


Amid sharply rising interest rates and greater economic uncertainty, the subject of loan guarantees to affiliates among Korean companies has become more important. 
In this insight, we discuss a pair trade between Shinsegae (long) and Hyundai Dept Store Co (short).
Four major reasons why we prefer Shinsegae vs Hyundai Dept Store include negative impact from equity spin-off, increasing leverage (including loan guarantees), valuations, and economies of scale. 


Korea Loan Guarantees: A Pair Trade Between Shinsegae & Hyundai Dept Store

<ul>
<li>One name is screened to newly join the index. That is Kum Yang (001570 KS). With a YTD performance of over 400%, it is currently in very safe territory.</li>
<li>Two constituents stand out as likely deletes at this point: Zinus (013890 KS) and Hwaseung Enterprise (241590 KS). The market cap gap with the next ones in line isn't small.</li>
<li>Kum Yang's passive impact is substantially low due to the recent surge in TV. But if it moves sideways and TV stabilizes downward, we should build preemptive flow trade setups. </li>
</ul>


One name is screened to newly join the index. That is Kum Yang (001570 KS). With a YTD performance of over 400%, it is currently in very safe territory.
Two constituents stand out as likely deletes at this point: Zinus (013890 KS) and Hwaseung Enterprise (241590 KS). The market cap gap with the next ones in line isn't small.
Kum Yang's passive impact is substantially low due to the recent surge in TV. But if it moves sideways and TV stabilizes downward, we should build preemptive flow trade setups. 


KOSPI 200 Rebalancing Early Preview: Few Names Stand Out

South Korea

Zinus Inc. wholesales and distributes household furniture. The Company wholesales and distributes bed frames, sofas, platform beds, mattresses, and other related products. Zinus markets its products worldwide.

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Zinus (013890 KS)

Potential Inclusions & Exclusions for KOSPI 200 and KOSDAQ 150 in May 2023 Highlighted by Locals

In this insight, we discuss the potential inclusions and exclusions that the locals are highlighting for the KOSPI 200 and KOSDAQ 150 rebalance in...

Douglas Kim

Aggressive Shorting on Dongwon Industries, Which Has Not Been Noticed as a K200 Deletion

This post presents the shorting opportunity on Dongwon Industries, which will likely be deleted in the KOSPI 200 June review, as its free-float...

Sanghyun Park

Clarifying Market's Inaccurate Constituent Change Forecast in K200 Rebalancing with GICS Revision

This post clarifies the market's inaccurate constituent change forecast on the upcoming KOSPI 200 rebalancing in June with the GICS revision,...

Sanghyun Park

Korea Loan Guarantees: A Pair Trade Between Shinsegae & Hyundai Dept Store

Four major reasons why we prefer Shinsegae vs Hyundai Dept Store include negative impact from equity spin-off, increasing leverage (including loan...

Douglas Kim

KOSPI 200 Rebalancing Early Preview: Few Names Stand Out

This post provides an early preview of the KOSPI 200 rebalancing. Several names stand out as likely constituent changes, including Kum Yang,...

Sanghyun Park

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