In today’s briefing:
- A Practical Guide to Stub Arb Trade in the Korean Stock Market
- Hanjin Group Chairman Cho Fights Back Against Hoban Group for Control of Hanjin Kal
- A Pair Trade (Basket) Of Korean Banks Vs Securities
A Practical Guide to Stub Arb Trade in the Korean Stock Market
- Due to NAV accuracy issues, locals favor sigma plays within ±2σ bands over classic stub trades, with aggressive traders rotating longs and shorts around ±1σ.
- Avoid trending divergence periods; these eight targets usually mean-revert well, but H1 this year showed unusually deep divergence—important to consider for current sigma plays.
- As of today, no 20-day MA sigmas trigger trades, but holding company strength drives price ratios—a trend likely lasting post-election—suggesting ±2σ sigma plays with longs in holdcos.
Hanjin Group Chairman Cho Fights Back Against Hoban Group for Control of Hanjin Kal
- On 15 May, Hanjin KAL Corp (180640 KS) announced that it will contribute 440,044 shares of its treasury stock to the company’s welfare fund, representing 0.7% of its common shares.
- This is a clear indication of Hanjin Kal Chairman Cho Won-Tae and his allies launching a management rights defense against Hoban Group which recently increased its stake in Hanjin Kal.
- The higher probability scenario is for Hanjin Kal’s shares to retrace down to below 100,000 won level as a full blown M&A fight is not likely in the near future.
A Pair Trade (Basket) Of Korean Banks Vs Securities
- In this insight, we propose a pair trade between a basket of major securities stocks (long) versus banking stocks (short) in Korea.
- We believe the five major securities stocks in Korea could continue to outperform the five major banking stocks in Korea over the next 6-12 months.
- We present 3 major headwinds on the Korean banking sector and 4 major tailwinds on the Korean securities sector.
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