Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<ul>
<li>In this insight, we highlight the pricing gap divergences of the major Korean holdcos and opcos in 4Q 2023.</li>
<li>Of the 38 pair trades, 18 of them involved holdcos outperforming opcos YTD and 20 of them involved opcos outperforming holdcos in the same period.</li>
<li>We highlight 38 pair trades that involve Korean holdcos and opcos.</li>
</ul>


In this insight, we highlight the pricing gap divergences of the major Korean holdcos and opcos in 4Q 2023.
Of the 38 pair trades, 18 of them involved holdcos outperforming opcos YTD and 20 of them involved opcos outperforming holdcos in the same period.
We highlight 38 pair trades that involve Korean holdcos and opcos.


Korean Holdcos Vs Opcos Gap Trading Opportunities in 4Q 2023

Quantitative Researcher, MRM Research

Nico Rosti

Quantitative Researcher

MRM Research

Quantitative Research

Event-Driven

Korea Stock Exchange KOSPI 200 / Event-Driven

<ul>
<li>The <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">KOSPI 200 INDEX</a> WEEKLY did rise last week and is approaching OVERBOUGHT territory based on the current short-term trend pattern (Q3 resistance is at 346).</li>
<li>The current pattern is bearish, but if the market gains momentum and rallies for 2 more weeks, <strong>it could reach 357 during the 3rd week up</strong> (<strong>not earlier</strong>).</li>
<li>The alternative scenario, a better fit for this bearish pattern, is that the index starts to pull back this week, or remains weak this week and falls the next.</li>
</ul>


The KOSPI 200 INDEX WEEKLY did rise last week and is approaching OVERBOUGHT territory based on the current short-term trend pattern (Q3 resistance is at 346).
The current pattern is bearish, but if the market gains momentum and rallies for 2 more weeks, it could reach 357 during the 3rd week up (not earlier).
The alternative scenario, a better fit for this bearish pattern, is that the index starts to pull back this week, or remains weak this week and falls the next.


EQD | KOSPI 200 Index WEEKLY OVERBOUGHT (Or Break-Out Rally?)

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

<ul>
<li>The review period for the September rebalance of the KOSPI Size Indices started 1 June and will end 31 August. The changes will be implemented at the close 7 September.</li>
<li>We see 7 migrations from MidCap to LargeCap, 6 migrations from LargeCap to MidCap, 7 new adds to MidCap, and 17 migrations from SmallCap to MidCap.</li>
<li>Historically, stocks migrating from SmallCap to MidCap have outperformed stocks that are migrating between other categories.</li>
</ul>


The review period for the September rebalance of the KOSPI Size Indices started 1 June and will end 31 August. The changes will be implemented at the close 7 September.
We see 7 migrations from MidCap to LargeCap, 6 migrations from LargeCap to MidCap, 7 new adds to MidCap, and 17 migrations from SmallCap to MidCap.
Historically, stocks migrating from SmallCap to MidCap have outperformed stocks that are migrating between other categories.


KOSPI Size Indices - Plenty of Migrations to Attract Active Flows

<ul>
<li>There have been increasing local news flows about KDB's potential "Plan B" for Asiana Airlines in case the merger between Asiana Airlines and Korean Air Lines is finally cancelled.</li>
<li>The final decisions by the European and US regulators on whether to pass/block this merger are likely to take place in 4Q 2023. </li>
<li>The higher probability scenarios are for one or both of these regulators to block this deal. As such, KDB will need to come up with Plan B.</li>
</ul>


There have been increasing local news flows about KDB's potential "Plan B" for Asiana Airlines in case the merger between Asiana Airlines and Korean Air Lines is finally cancelled.
The final decisions by the European and US regulators on whether to pass/block this merger are likely to take place in 4Q 2023. 
The higher probability scenarios are for one or both of these regulators to block this deal. As such, KDB will need to come up with Plan B.


What Is KDB's Plan B for Asiana Airlines?

<ul>
<li>The review period for the September rebalance of the KOSPI Size Indices started 1 June and will end 31 August. The changes will be implemented at the close 7 September.</li>
<li>We see 8 migrations from MidCap to LargeCap, 7 migrations from LargeCap to MidCap, 6 new adds to MidCap, and 16 migrations from SmallCap to MidCap.</li>
<li>Historically, stocks migrating from SmallCap to MidCap have outperformed stocks that are migrating between other categories.</li>
</ul>


The review period for the September rebalance of the KOSPI Size Indices started 1 June and will end 31 August. The changes will be implemented at the close 7 September.
We see 8 migrations from MidCap to LargeCap, 7 migrations from LargeCap to MidCap, 6 new adds to MidCap, and 16 migrations from SmallCap to MidCap.
Historically, stocks migrating from SmallCap to MidCap have outperformed stocks that are migrating between other categories.


KOSPI Size Indices - Plenty of Overlap With Other Index Flows

South Korea

Korean Air Lines Co., Ltd. operates air transportation services.  The Company's services include passenger and cargo transportation, aircraft maintenance, and air catering.  Korean Air Lines provides domestic and international airline services.

Asiana Airlines, Inc. provides air cargo and passenger transportation services throughout South Korea and overseas.  The Company also offers airline catering and on-flight duty free shopping services and operates aircraft leasing business.

Jeju Air Co., Ltd. operates as an airline carrier in the aviation industry.   The Company provides air transportation services for passengers, baggage, and cargo within South Korea, Japan, and Southeastern Asian countries.

Tway Air Co., Ltd operates as an airline company. The Company offers flight, hotel, car booking services. Tway Air also provides reissuance of ticket, baggage, airport, and in-flight services. Tway Air serves customers worldwide.

Jin Air Co.,Ltd. provides air transportation services. The Company offers passenger and freight air transportation services, aviation equipment maintenance, aircraft leasing services, and other services. Jin Air also provides ticket and hotel booking and consulting services.

Air Busan Co., Ltd. operates as an airline company. The Company offers international and domestic flight, hotel, and car booking services. Air busan also provides reissuance of ticket, baggage, airport, and in flight services. Air busan offers services worldwide.

Pan Ocean Co., Ltd. is a Korean shipping company that engages in marine transportation business. The Company provides bulk cargo carrier, pure car and truck carrier, container and tanker services.

CJ Logistics Corporation provides logistics services. The Company provides land transportation, maritime transportation, harbor unloading, cargo storage, international logistics processing, and other services. CJ Logistics also provides internet home shopping services. CJ Logistics serves customers worldwide.

Korea Line Corporation (KLC) owns and operates a fleet of vessels that carry bulk cargo, such as iron core, coal, hot coils, and liquefied natural gas (LNG). The Company provides exclusive lines for Pohang Iron & Steel, Korea Gas, and Korea Electric under long term contracts.  KLC also offers tramp services, and transports grain, sugar, logs, minerals, and steel products.

Heung-A Shipping Co., Ltd. provides shipping trade services.  The Company also provides chemical tankers to transport petrochemicals in areas that includes Japan, Taiwan, China, and Southeast Asian regions.

China Airlines Limited provides scheduled international air transportation for passengers and cargo freight throughout cities in Europe, America, Asia, and Australia.

SkyWest, Inc. operates regional airlines that offer scheduled passenger service to destinations in the United States, Canada, Mexico, and the Caribbean.

Dart Group plc, an aviation services and distribution group, operates cargo and passenger aircraft on charter contracts and scheduled low cost services throughout Europe.  The Group also distributes fresh produce and temperature controlled products to supermarkets and wholesale markets throughout the United Kingdom.  Dart conducts freight forwarding services from various airports.

Wizz Air Holdings Plc provides passenger and cargo air transportation services. The Company offers flight and connection programs in Central and Eastern Europe.

PAL Holdings, Inc., through its subsidiaries, engages in the air transportation of passengers and cargo in the Philippines and internationally. As of December 31, 2014, its route network covered 32 points in the Philippines and 35 international destinations. The company was formerly known as Baguio Gold Holdings Corporation and changed its name to PAL Holdings, Inc. in January 2007. The company was incorporated in 1930 and is based in Makati, the Philippines. PAL Holdings, Inc. is a subsidiary of Trustmark Holdings Corporation.

Pegasus Hava Tasimaciligi AS offers scheduled air passenger transportation services. The Company offers air transport services within Turkey and between Turkey and other European destinations.

Juneyao Airlines Co. Ltd. supplies air transportation services. The Company provides domestic and international routes for passengers and cargoes. Juneyao Airlines also offers ticket home delivery and electronic ticketing services.

JetBlue Airways Corporation provides nonstop passenger flight service through its Airbus A320 aircraft.  The Company's airline is based in New York's John F. Kennedy Airport and currently flies to various destinations in the United States.

Alaska Air Group, Inc. is an airline holding company. The Company, through its subsidiaries, provides air service to passengers in multiple destinations. Alaska Air also provide freight and mail services, primarily to and within the state of Alaska and on the West Coast.

Air France-KLM provides air transportation services. The Company operates airlines and offers travel booking, catering, freight transportation, aircraft maintenance, and pilot training services. Air France-KLM serves customers worldwide.

Hanjin KAL Corporation is a holding company. The Company, through its subsidiaries, engages in airline, hotel, and travel related services. Hanjin also invests in real estates.

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Hanjin KAL Corp (180640 KS)

Korean Holdcos Vs Opcos Gap Trading Opportunities in 4Q 2023

In this insight, we highlight the pricing gap divergences of the major Korean holdcos and opcos in 4Q 2023. We highlight 38 pair trades that...

Douglas Kim

EQD | KOSPI 200 Index WEEKLY OVERBOUGHT (Or Break-Out Rally?)

The KOSPI 200 Index is approaching Q3/overbought territory, this pattern is bearish, but if the index keeps rallying for 2 more weeks, it could...

Nico Rosti

KOSPI Size Indices - Plenty of Migrations to Attract Active Flows

We currently forecast 53 migrations for the KOSPI Size Indices. There are stocks that are potential KOSPI200 adds in December and others that will...

Brian Freitas

What Is KDB's Plan B for Asiana Airlines?

There have been increasing local news flows about KDB's potential "Plan B" for Asiana Airlines in case the merger between Asiana Airlines and...

Douglas Kim

KOSPI Size Indices - Plenty of Overlap With Other Index Flows

We currently forecast 52 changes for the KOSPI Size Indices. While there are few passive assets tracking these indices, they are used by active...

Brian Freitas

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Korean Holdcos Vs Opcos Gap Trading Opportunities in 4Q 2023

In this insight, we highlight the pricing gap divergences of the major Korean holdcos and opcos in 4Q 2023. We highlight 38 pair trades that...

Douglas Kim

EQD | KOSPI 200 Index WEEKLY OVERBOUGHT (Or Break-Out Rally?)

​The KOSPI 200 Index is approaching Q3/overbought territory, this pattern is bearish, but if the index keeps rallying for 2 more weeks, it could...

Nico Rosti

KOSPI Size Indices - Plenty of Migrations to Attract Active Flows

We currently forecast 53 migrations for the KOSPI Size Indices. There are stocks that are potential KOSPI200 adds in December and others that will...

Brian Freitas

What Is KDB's Plan B for Asiana Airlines?

There have been increasing local news flows about KDB's potential "Plan B" for Asiana Airlines in case the merger between Asiana Airlines and...

Douglas Kim

KOSPI Size Indices - Plenty of Overlap With Other Index Flows

We currently forecast 52 changes for the KOSPI Size Indices. While there are few passive assets tracking these indices, they are used by active...

Brian Freitas

The KOSPI 200 Index is approaching Q3/overbought territory, this pattern is bearish, but if the index keeps rallying for 2 more weeks, it could...