Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Event-Driven

<ul>
<li>As expected, Sungeel Hitech (365340) made it to the index. And C&amp;I System (222080) and Wonik PNE (217820) were added, whereas Ecopro (086520) and Dongwha Enterprise (025900) were deleted.</li>
<li>Among the existing constituents, Samsung SDI (006400), Ecopro BM (247540), SK Innovation (096770), L&amp;F (066970), and SKC (011790) are expected to have a relatively significant impact.</li>
<li>Looking at the last rebalancing, the impact/price correlation was most significant on Day 1. So, we should consider aiming for LONG/SHORT today for those with a high relative impact.</li>
</ul>


As expected, Sungeel Hitech (365340) made it to the index. And C&amp;I System (222080) and Wonik PNE (217820) were added, whereas Ecopro (086520) and Dongwha Enterprise (025900) were deleted.
Among the existing constituents, Samsung SDI (006400), Ecopro BM (247540), SK Innovation (096770), L&amp;F (066970), and SKC (011790) are expected to have a relatively significant impact.
Looking at the last rebalancing, the impact/price correlation was most significant on Day 1. So, we should consider aiming for LONG/SHORT today for those with a high relative impact.


KODEX Battery Rebalancing Results Out: From Today to Next Tuesday

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<ul>
<li>SK On announced that it recently received 1 trillion won in investment, valuing the company at 22 trillion won, 29% higher than SK Innovation's market cap of 17 trillion won. </li>
<li>The recent investment of nearly 1 trillion won in SK On was in the form of convertible preferred stock (CPS), which guarantees a minimum return of 7.5%.</li>
<li>Our SoTP valuation of SK Innovation suggests a target price of 254,396 won per share, which represents a 39% higher levels than current price.</li>
</ul>


SK On announced that it recently received 1 trillion won in investment, valuing the company at 22 trillion won, 29% higher than SK Innovation's market cap of 17 trillion won. 
The recent investment of nearly 1 trillion won in SK On was in the form of convertible preferred stock (CPS), which guarantees a minimum return of 7.5%.
Our SoTP valuation of SK Innovation suggests a target price of 254,396 won per share, which represents a 39% higher levels than current price.


SK On Valuation at 22 Trillion Won - Impact on SK Innovation

Equity Bottom-Up

<ul>
<li>Our base case target price of 276,567 won suggests a 37% upside from current levels for SK Inc. Our base case valuation assumes a 30% holdco discount.</li>
<li>At DPS of 8,000 won, this would represent dividend yield of 4% at current price of 202,000 won.</li>
<li>The three largest holdcos/quasi holdcos in Korea which include Samsung C&amp;T, SK Inc, and LG Corp have strongly outperformed KOSPI this year. </li>
</ul>


Our base case target price of 276,567 won suggests a 37% upside from current levels for SK Inc. Our base case valuation assumes a 30% holdco discount.
At DPS of 8,000 won, this would represent dividend yield of 4% at current price of 202,000 won.
The three largest holdcos/quasi holdcos in Korea which include Samsung C&amp;T, SK Inc, and LG Corp have strongly outperformed KOSPI this year. 


SK Inc: Solid Dividends, Ongoing Buyback, and Emphasis on Value Should Lead to Outperformance

<ul>
<li>LG Chem's deletion is almost a done deal. The pouch-type pack goes to LG Energy, and the cathode business is not big enough to beat L&amp;F.</li>
<li>Chunbo is an additive field that this index has not included so far. So, Chunbo will be added as a new addition rather than replacing someone else.</li>
<li>SK IE Tech is quite tricky. The key is to see separator and elecfoil as the same field. If so, SK IET is likely to replace Iljin Materials.</li>
</ul>


LG Chem's deletion is almost a done deal. The pouch-type pack goes to LG Energy, and the cathode business is not big enough to beat L&amp;F.
Chunbo is an additive field that this index has not included so far. So, Chunbo will be added as a new addition rather than replacing someone else.
SK IE Tech is quite tricky. The key is to see separator and elecfoil as the same field. If so, SK IET is likely to replace Iljin Materials.


Solactive Lithium Index Rebalancing: Noteworthy Names in Korea Before the Announcement

<ul>
<li>Long/Short basket trading on an equal weight using only six stocks for a 10% ceiling reversion with SungEel and Sebitchem would have delivered a daily yield of close to 2%.</li>
<li>An outright position on SungEel and Sebitchem and the biggest mover, Ecopro BM, alone would have delivered a pretty juicy yield of 4.2%.</li>
<li>The rebalancing of this ETF is an event that allows you to bet on highly predictable share price movements by forming a basket with a relatively small number of stocks.</li>
</ul>


Long/Short basket trading on an equal weight using only six stocks for a 10% ceiling reversion with SungEel and Sebitchem would have delivered a daily yield of close to 2%.
An outright position on SungEel and Sebitchem and the biggest mover, Ecopro BM, alone would have delivered a pretty juicy yield of 4.2%.
The rebalancing of this ETF is an event that allows you to bet on highly predictable share price movements by forming a basket with a relatively small number of stocks.


Tracing Back TIGER (WISE) Battery ETF Rebalancing on October 13

South Korea

SK Innovation Co., Ltd. refines, markets, and distributes oil.  The Company produces a variety of petroleum products, such as gasoline, kerosene, liquefied petroleumgas (LPG), and diesel oil.  SK Energy also manufactures petrochemical p roducts, including paraxylene, synthetic resins, styrene monomer, and ethylene.

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SK Innovation (096770 KS)

KODEX Battery Rebalancing Results Out: From Today to Next Tuesday

This post details the rebalancing results and resulting passive impacts of the KODEX Secondary Battery ETF, which runs from today to next Tuesday.

Sanghyun Park

SK On Valuation at 22 Trillion Won - Impact on SK Innovation

SK On announced that it recently received 1 trillion won in investment, valuing the company at 22 trillion won, 29% higher than SK Innovation's...

Douglas Kim

SK Inc: Solid Dividends, Ongoing Buyback, and Emphasis on Value Should Lead to Outperformance

Our base case target price of 276,567 won suggests a 37% upside from current levels for SK Inc. Our base case valuation assumes a 30% holdco discount.

Douglas Kim

Solactive Lithium Index Rebalancing: Noteworthy Names in Korea Before the Announcement

This post discusses the notable Korean stocks in the upcoming rebalancing of the Solactive Lithium Index (Global X ETF: LIT).

Sanghyun Park

Tracing Back TIGER (WISE) Battery ETF Rebalancing on October 13

This post traces back and backtests the rebalancing of the WISE Battery ETF, which occurred last Thursday, to examine the correction degree of net...

Sanghyun Park

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