In today’s briefing:
- Korea Short Selling: What Happened on Day 1?
- A Pair Trade Between LG Chem (Common) And LG Chem (Preferred)
Korea Short Selling: What Happened on Day 1?
- Short notional ticked higher on the KOSPI and KOSDAQ markets and is expected to continue increasing over the next few months.
- Since the resumption of short selling, foreign holdings of Korean equities have increased from 29.26% to 29.3%.
- The Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) to KOSDAQ 150 Index (KOSDQ150 INDEX) ratio has stayed stable over the last 3 trading days.
A Pair Trade Between LG Chem (Common) And LG Chem (Preferred)
- In this insight, we discuss a pair trade between LG Chem Ltd (051910 KS) (common) and LG Chem (051915 KS) (preferred).
- The price ratio (LG Chem common/preferred) is now at 2.16x, which is more than 2 STD (standard deviations). Our trading strategy involves revert to the mean.
- One of the key reasons why LG Chem (preferred)’s share price has fared much worse YTD than LG Chem (common) is due to much larger selling by the foreign investors.
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