Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

In this insight, we discuss the stocks that could get included or excluded in the November 2021 KOSPI 200 rebalance. We highlight 15 stocks that could get included and 10 stocks that could get excluded in the upcoming KOSPI 200 rebalance.<div class="content-highlight">
This rebalance of the KOSPI 200 strategy is a type of momentum-driven strategy. The 15 stocks that we think could get included in the next KOSPI 200 rebalance have generated strong share price performances (up 55% on average in the past six months). 
On the other hand, the 10 stocks which we think could get excluded in the next KOSPI 200 rebalance (the bottom 5% of KOSPI 200 index in terms of market cap) have done much worse in terms of their share price performance (down 6.1% on average in the past six months). 
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In this insight, we discuss the stocks that could get included or excluded in the November 2021 KOSPI 200 rebalance. We highlight 15 stocks that could get included and 10 stocks that could get excluded in the upcoming KOSPI 200 rebalance.
This rebalance of the KOSPI 200 strategy is a type of momentum-driven strategy. The 15 stocks that we think could get included in the next KOSPI 200 rebalance have generated strong share price performances (up 55% on average in the past six months). 
On the other hand, the 10 stocks which we think could get excluded in the next KOSPI 200 rebalance (the bottom 5% of KOSPI 200 index in terms of market cap) have done much worse in terms of their share price performance (down 6.1% on average in the past six months). 


Potential Changes of KOSPI 200 Index Components in the November 2021 Rebalance

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

With <a href="https://www.smartkarma.com/entities/kakaobank-corp" target="_blank" data-smartkarma-citation="entities:33501:1" rel="noopener">KakaoBank (323410 KS)</a> and <a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960 KS)</a> nearing the end of their first 15 days of trading, they are a certainty to be included in 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> at the September rebalance that coincides with the index futures expiry.Post the changes at the June rebalance, we see <a href="https://www.smartkarma.com/entities/lock-lock-co-ltd" target="_blank" data-smartkarma-citation="entities:4739:1" rel="noopener">Lock&amp;Lock (115390 KS)</a> and <a href="https://www.smartkarma.com/entities/jw-pharmaceutical-corp" target="_blank" data-smartkarma-citation="entities:18784:1" rel="noopener">Jw Pharmaceutical (001060 KS)</a> as the lowest ranked constituents and the stocks could be deleted at the September rebalance.We expect the announcement of the changes on 1 September and the implementation at the close of trading on 9 September.The impact from passive trading is not very high on the inclusions while the impact on the potential deletions is a lot higher. There is a bit of short interest on the potential deletions and some of that could be covered in the lead up to index deletion.The dynamics of the index changes are pretty interesting. <a href="https://www.smartkarma.com/entities/kakaobank-corp" target="_blank" data-smartkarma-citation="entities:33501:1" rel="noopener">KakaoBank (323410 KS)</a> and <a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960 KS)</a> will be short-sell eligible from 10 September while the deletions will no longer be short-sell eligible. We suggest potential trading strategies to take advantage of these dynamics.

With KakaoBank (323410 KS) and  Krafton Inc (259960 KS) nearing the end of their first 15 days of trading, they are a certainty to be included in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the September rebalance that coincides with the index futures expiry.Post the changes at the June rebalance, we see Lock&amp;Lock (115390 KS) and Jw Pharmaceutical (001060 KS) as the lowest ranked constituents and the stocks could be deleted at the September rebalance.We expect the announcement of the changes on 1 September and the implementation at the close of trading on 9 September.The impact from passive trading is not very high on the inclusions while the impact on the potential deletions is a lot higher. There is a bit of short interest on the potential deletions and some of that could be covered in the lead up to index deletion.The dynamics of the index changes are pretty interesting. KakaoBank (323410 KS) and  Krafton Inc (259960 KS) will be short-sell eligible from 10 September while the deletions will no longer be short-sell eligible. We suggest potential trading strategies to take advantage of these dynamics.

KOSPI200 September Rebalance Preview: Double Edged Sword

There could be two changes to 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> at the September index futures expiry with <a href="https://www.smartkarma.com/entities/kakaobank-corp" target="_blank" data-smartkarma-citation="entities:33501:1" rel="noopener">KakaoBank (1349010D KS)</a> and <a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960 KS)</a> getting Fast Entry and replacing <a href="https://www.smartkarma.com/entities/lock-lock-co-ltd" target="_blank" data-smartkarma-citation="entities:4739:1" rel="noopener">Lock&amp;Lock (115390 KS)</a> and <a href="https://www.smartkarma.com/entities/jw-pharmaceutical-corp" target="_blank" data-smartkarma-citation="entities:18784:1" rel="noopener">Jw Pharmaceutical (001060 KS)</a> at the close of trading on 9 September.Then, the Korea Exchange (KRX) will announce the results of the December 2021 review of 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> in November. The constituent changes will be effective after the close of trading on 9 December.We see 5 potential changes at the December rebalance with <a href="https://www.smartkarma.com/entities/f-f-co-ltd-new" target="_blank" data-smartkarma-citation="entities:33479:1" rel="noopener">F&amp;F (383220 KS)</a>, <a href="https://www.smartkarma.com/entities/sl-corp" target="_blank" data-smartkarma-citation="entities:20694:1" rel="noopener">SL Corp (005850 KS)</a>, <a href="https://www.smartkarma.com/entities/geneone-life-science-inc" target="_blank" data-smartkarma-citation="entities:6549:1" rel="noopener">GeneOne Life Science Inc. (011000 KS)</a>, <a href="https://www.smartkarma.com/entities/myoung-shin-industrial-co-ltd" target="_blank" data-smartkarma-citation="entities:29698:1" rel="noopener">Myoung Shin Industrial Co.,Ltd (009900 KS)</a> and <a href="https://www.smartkarma.com/entities/hyosung-chemical-corp" target="_blank" data-smartkarma-citation="entities:27752:1" rel="noopener">Hyosung Chemical Corp (298000 KS)</a> replacing <a href="https://www.smartkarma.com/entities/f-f-co-ltd" target="_blank" data-smartkarma-citation="entities:15983:1" rel="noopener">F&amp;F Co Ltd (007700 KS)</a>, <a href="https://www.smartkarma.com/entities/samyang-foods-co-ltd" target="_blank" data-smartkarma-citation="entities:9100:1" rel="noopener">Samyang Foods (003230 KS)</a>, <a href="https://www.smartkarma.com/entities/ilyang-pharmaceutical-co-ltd" target="_blank" data-smartkarma-citation="entities:2789:1" rel="noopener">Ilyang Pharmaceutical Co., (007570 KS)</a>, <a href="https://www.smartkarma.com/entities/lx-holdings" target="_blank" data-smartkarma-citation="entities:33384:1" rel="noopener">LX Holdings (383800 KS)</a> and <a href="https://www.smartkarma.com/entities/dongwon-f-b-co-ltd" target="_blank" data-smartkarma-citation="entities:3274:1" rel="noopener">Dongwon F&amp;B (049770 KS)</a>.The potential inclusions have been outperforming the potential exclusions and this could continue as short selling is only permitted on index constituents and as active funds position for the rebalance following excellent returns at the June rebalance.

There could be two changes to the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the September index futures expiry with KakaoBank (1349010D KS) and  Krafton Inc (259960 KS) getting Fast Entry and replacing Lock&amp;Lock (115390 KS) and Jw Pharmaceutical (001060 KS) at the close of trading on 9 September.Then, the Korea Exchange (KRX) will announce the results of the December 2021 review of the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) in November. The constituent changes will be effective after the close of trading on 9 December.We see 5 potential changes at the December rebalance with F&amp;F (383220 KS), SL Corp (005850 KS), GeneOne Life Science Inc. (011000 KS), Myoung Shin Industrial Co.,Ltd (009900 KS) and Hyosung Chemical Corp (298000 KS) replacing F&amp;F Co Ltd (007700 KS), Samyang Foods (003230 KS), Ilyang Pharmaceutical Co., (007570 KS), LX Holdings (383800 KS) and Dongwon F&amp;B (049770 KS).The potential inclusions have been outperforming the potential exclusions and this could continue as short selling is only permitted on index constituents and as active funds position for the rebalance following excellent returns at the June rebalance.

KOSPI200 Index Rebalance Preview: Two Changes in September; Five in December

The Korea Exchange (KRX) will announce the results of the December 2021 review of 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> in November. The constituent changes will be effective after the close of trading on 9 December.There could be a change at the September futures expiry with <a href="https://www.smartkarma.com/entities/sd-biosensor-inc" target="_blank" data-smartkarma-citation="entities:33333:1" rel="noopener">SD Biosensor (SDBIOZ KS)</a> getting Fast Entry into the index. We see <a href="https://www.smartkarma.com/entities/lock-lock-co-ltd" target="_blank" data-smartkarma-citation="entities:4739:1" rel="noopener">Lock&amp;Lock (115390 KS)</a> as a potential deletion to make way for <a href="https://www.smartkarma.com/entities/sd-biosensor-inc" target="_blank" data-smartkarma-citation="entities:33333:1" rel="noopener">SD Biosensor (SDBIOZ KS)</a>. At the current time, we see 3 potential changes at the regular review in December with F&amp;F Co (383220 KS), <a href="https://www.smartkarma.com/entities/sl-corp" target="_blank" data-smartkarma-citation="entities:20694:1" rel="noopener">Sl Corp (005850 KS)</a> and <a href="https://www.smartkarma.com/entities/seah-besteel-corp" target="_blank" data-smartkarma-citation="entities:11760:1" rel="noopener">Seah Besteel (001430 KS)</a> replacing <a href="https://www.smartkarma.com/entities/samyang-foods-co-ltd" target="_blank" data-smartkarma-citation="entities:9100:1" rel="noopener">Samyang Foods (003230 KS)</a>, <a href="https://www.smartkarma.com/entities/f-f-co-ltd" target="_blank" data-smartkarma-citation="entities:15983:1" rel="noopener">F&amp;F Co Ltd (007700 KS)</a> and <a href="https://www.smartkarma.com/entities/jw-pharmaceutical-corp" target="_blank" data-smartkarma-citation="entities:18784:1" rel="noopener">Jw Pharmaceutical (001060 KS)</a>. These names could change over the next few months and their prices (and the prices of the other stocks) move around.After the 100%+ returns in 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> June review by buying the inclusions and selling the exclusions (or the KOSPI2 index futures), there will be a lot of interest in the December review.In this Insight we look at the KOSPI 200 index methodology, the historical performance of inclusions vs exclusions, at potential candidates for inclusion/exclusion in this review and some of the details around the names.

The Korea Exchange (KRX) will announce the results of the December 2021 review of the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) in November. The constituent changes will be effective after the close of trading on 9 December.There could be a change at the September futures expiry with SD Biosensor (SDBIOZ KS) getting Fast Entry into the index. We see Lock&amp;Lock (115390 KS) as a potential deletion to make way for SD Biosensor (SDBIOZ KS). At the current time, we see 3 potential changes at the regular review in December with F&amp;F Co (383220 KS), Sl Corp (005850 KS) and Seah Besteel (001430 KS) replacing Samyang Foods (003230 KS), F&amp;F Co Ltd (007700 KS) and Jw Pharmaceutical (001060 KS). These names could change over the next few months and their prices (and the prices of the other stocks) move around.After the 100%+ returns in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) June review by buying the inclusions and selling the exclusions (or the KOSPI2 index futures), there will be a lot of interest in the December review.In this Insight we look at the KOSPI 200 index methodology, the historical performance of inclusions vs exclusions, at potential candidates for inclusion/exclusion in this review and some of the details around the names.

KOSPI200 Index Rebalance Preview: Focus Shifts to December After a Fantastic June Review

Cross Asset Strategy

<ul>
<li>The Korea Exchange announced its bi-annual changes to KOSPI200 today. These changes are effective 12 June 2020. For the KOSPI200, there were 11 new additions including <a href="https://www.smartkarma.com/entities/hanjin-kal-corp" target="_blank" data-smartkarma-citation="entities:19086:1" rel="noopener">Hanjin KAL Corp (180640 KS)</a>, <a href="https://www.smartkarma.com/entities/asiana-airlines" target="_blank" data-smartkarma-citation="entities:1896:1" rel="noopener">Asiana Airlines (020560 KS)</a>, and <a href="https://www.smartkarma.com/entities/lotte-tour-development-co-ltd" target="_blank" data-smartkarma-citation="entities:5526:1" rel="noopener">Lotte Tour Development Co, Ltd. (032350 KS)</a>.  There were also 11 deletions including <a href="https://www.smartkarma.com/entities/namyang-dairy-products-co" target="_blank" data-smartkarma-citation="entities:16249:1" rel="noopener">Namyang Dairy Products Co (003920 KS)</a>, <a href="https://www.smartkarma.com/entities/ak-holdings-inc" target="_blank" data-smartkarma-citation="entities:3472:1" rel="noopener">Ak Holdings Inc (006840 KS)</a>, and <a href="https://www.smartkarma.com/entities/hyosung-heavy-industries-corp" target="_blank" data-smartkarma-citation="entities:27750:1" rel="noopener">Hyosung Heavy Industries Corp (298040 KS)</a>.  </li>
<li>Comparing the actual inclusions vs. our estimates for the KOSPI 200 Inclusion, five of the companies were included in both lists (Hajin Kal, POSCO Chem, F&amp;F, Asiana Airlines, &amp; HMM). </li>
<li>Comparing the actual exclusions vs. our estimates for the KOSPI 200 Exclusion, seven of the companies were included in both lists (Hyosung Heavy, Ssangyong Motor, Namyang Dairy, Hyundai Livart, Hankook Shell Oil, Tongyang, and AK Holdings). </li>
</ul>


The Korea Exchange announced its bi-annual changes to KOSPI200 today. These changes are effective 12 June 2020. For the KOSPI200, there were 11 new additions including Hanjin KAL Corp (180640 KS), Asiana Airlines (020560 KS), and Lotte Tour Development Co, Ltd. (032350 KS).  There were also 11 deletions including Namyang Dairy Products Co (003920 KS), Ak Holdings Inc (006840 KS), and Hyosung Heavy Industries Corp (298040 KS).  
Comparing the actual inclusions vs. our estimates for the KOSPI 200 Inclusion, five of the companies were included in both lists (Hajin Kal, POSCO Chem, F&amp;F, Asiana Airlines, &amp; HMM). 
Comparing the actual exclusions vs. our estimates for the KOSPI 200 Exclusion, seven of the companies were included in both lists (Hyosung Heavy, Ssangyong Motor, Namyang Dairy, Hyundai Livart, Hankook Shell Oil, Tongyang, and AK Holdings). 


Final Bi-Annual Rebalance Announced for KOSPI200, KOSDAQ150, & KRX300

South Korea

Dong Ah Tire & Rubber Co., Ltd. manufactures, sells, and exports automotive tire products.  The Company's products include inner tubes, rubber flaps, retread tires, batteries, carbon master batches, and other rubber parts for automobiles.

Sungwoo Hitech Co., Ltd. manufactures automotive parts, such as bumper rails, side members, and dash panels.  The Company supplies its products to Hyundai Motors.

S&T Motiv Co., Ltd. manufactures and markets a variety of automobile parts. The Company's products include motors, suspension modules, fuel rails, air bags, shock absorbers, and transmissions.  S&T Daewoo also produces car televisions, car navigation systems, and alarm systems.

Seoyon E-Hwa Co., Ltd. manufactures automotive interior parts.  The Company's products include door trims, head linings, package trays, seats, and covering shelves.  Seoyon E-Hwa supplies its products to Hyundai Motor.

Hwa Shin Co., Ltd. manufactures a variety of automotive chassis and body parts. The Company's products include rear suspension arms, modules, frames, panels, center members, oil pans, and brackets.  Hwa Shin sells its products to Hyundai Motor on an original equipment manufacturing (OEM) basis.

Sebang Global Battery Co., Ltd. specializes in manufacturing storage batteries used in automobiles, motorcycles, electric vehicles, and industrial machinery such as excavators and bulldozers.  The Company provides its products to domestic and overseas markets.

Dae Won Kang Up Co., Ltd. manufactures leaf and coil springs used in automobiles and precision springs used in electronic equipment and machinery.  The Company also produces air springs, seats, vehicle stabilizer bars, and construction materials.

HL Holdings Corporation operates as an investment company. The Company through its subsidiaries provides trademark rights using, information and technology products and supplies selling, auto parts and supplies sales and distribution, real estate investment and management services. HL Holdings markets its products throughout South Korea.

Nexen Corporation manufactures tire inner tubes, tire flaps, and curling tubes. The Company also produces curling envelopes, tread rubbers, solid and retread tires, golf balls, stainless steel wire, aluminum foils used in air-conditioner, condensers, and cables.

Pyeong Hwa Automotive Co., Ltd. manufactures automotive parts and components. The Company's products include a line of door locking systems, such as door latches, strikers, checkers, hinges, and modules.

Dongfeng Electronic Technology Co., Ltd. manufactures and markets motor vehicle parts and instruments including sensors, bearings, valves, and other related auto parts.  Through its subsidiaries, the Company also operates in automobiles and parts trading.

NIPPON SEIKI CO., LTD. manufactures instrument panels for automobiles, motorcycles, boats, farm tractors, and construction machines.  The Company has its production facilities in the US, the UK, Thailand, and Taiwan.

TYC Brother Industrial Co., Ltd. manufactures and markets automobile lights. The Company is a supplier of light products to both original and replacement parts markets.  TYC Brother mainly exports its products to the United States.

Jamna Auto Industries Limited is an automobile suspension springs manufacturer. The Group supplies its products to a number of key manufacturers, including Daewoo, Honda and Ford, among others.  Jamna also has a technological and equity collaboration with NHK Spring Company Limited, in which the companies will jointly manufacture coil springs and stabilizer bars.

Actron Technology Corporation manufactures diodes for automotive alternator.

Jiangsu Pacific Precision Forging Company Limited develops, manufactures and sells automotive and other precision forging gears. The Company's major products include axle gear and epicyclic gear for automobile differential, and gear combination for automobile transmission.

Jiangsu Pacific Precision Forging (300258 CH)

PACIFIC INDUSTRIAL CO., LTD. manufactures tire valves, pressed parts, and electronic control devices used for automobiles.  The Company's products include tire pressure monitoring system, which let drivers know tire condition such as air pressure and its temperature.  The Company has overseas production and sales subsidiaries in Korea, Taiwan, Thailand, and the US.

Xinzhi Motor Co., Ltd. develops, manufactures and sells various types of starters and rotors, provides domestic and foreign large electrical appliances manufacturers with professional support services. The Company's main products include automotive starters and rotors.

Subros Ltd. manufactures automotive air-conditioning systems. The Company's other related products include fan motor assemblies (ventilators) and multi flow condensers.

PIOLAX INC. manufactures precision springs and fasteners for automobiles, industrial, and medical use.  The Company has its subsidiaries in the US, the UK, and Korea.

Nexen Tire Corporation manufactures, markets, and exports tires and inner tubes for automobiles, industrial and agricultural machinery, and construction equipment.

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Nexen Tire Corp (002350 KS)

Potential Changes of KOSPI 200 Index Components in the November 2021 Rebalance

In this insight, we discuss stocks that could get included or excluded in the November 2021 KOSPI 200 rebalance. We highlight 15 stocks that could...

Douglas Kim

KOSPI200 September Rebalance Preview: Double Edged Sword

KakaoBank and Krafton are high probability inclusions to the KOSPI200 in September while Lock&Lock and JW Pharma are potential deletions. KakaoBank...

Brian Freitas

KOSPI200 Index Rebalance Preview: Two Changes in September; Five in December

We see 2 potential Fast Entry changes in September & then 5 more changes at the December rebalance. The adds are outperforming the deletes and the...

Brian Freitas

KOSPI200 Index Rebalance Preview: Focus Shifts to December After a Fantastic June Review

We see 1 potential change in September and 3 potential changes at the KOSPI200 December review. Post the excellent returns at the June rebalance,...

Brian Freitas

Final Bi-Annual Rebalance Announced for KOSPI200, KOSDAQ150, & KRX300

The Korea Exchange announced its bi-annual changes to KOSPI200 today. These changes are effective 12 June 2020. For the KOSPI200, there were 11...

Douglas Kim

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