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>For KODEX (FnGuide), the actual rebalancing trading must have begun yesterday, Feb 8, and runs until Feb 22, presumably at an equal daily weighting.</li>
<li>TIGER (WISE) announced that its implementation of LG Energy IN/LG Chem OUT was completed as of the end of yesterday.</li>
<li>As for the daily passive impact from KODEX until Feb 22, LG Energy is expected to receive an inflow of 0.03x DTV, whereas LG Chem's outflow should be -0.10x ADTV.</li>
</ul>


For KODEX (FnGuide), the actual rebalancing trading must have begun yesterday, Feb 8, and runs until Feb 22, presumably at an equal daily weighting.
TIGER (WISE) announced that its implementation of LG Energy IN/LG Chem OUT was completed as of the end of yesterday.
As for the daily passive impact from KODEX until Feb 22, LG Energy is expected to receive an inflow of 0.03x DTV, whereas LG Chem's outflow should be -0.10x ADTV.


LG Energy IN/LG Chem OUT: TIGER (WISE) Done on Feb 8 & KODEX (FnGuide) Under Progress Until Feb 22

<ul>
<li>As for LG Energy's inclusion timing, Solactive made a rule change, presumably designed for LG Energy's earlier entry on April 29.</li>
<li>Since LG Chem also has a battery-related business, LG Chem may remain in this index. However, the possibility should be low because its battery business is small in total sales.</li>
<li>LG Chem will experience an outflow of ₩250B (1.0x ADTV). And assuming that LG Energy receives 4.75%, a passive impact of 0.31x at a DTV of 1.5M shares is expected.</li>
</ul>


As for LG Energy's inclusion timing, Solactive made a rule change, presumably designed for LG Energy's earlier entry on April 29.
Since LG Chem also has a battery-related business, LG Chem may remain in this index. However, the possibility should be low because its battery business is small in total sales.
LG Chem will experience an outflow of ₩250B (1.0x ADTV). And assuming that LG Energy receives 4.75%, a passive impact of 0.31x at a DTV of 1.5M shares is expected.


Solactive Global Lithium Index (LIT): Earlier Implementation Expected for LG Energy & LG Chem

<ul>
<li>There is recently a growing view that the ETF operators (KODEX and TIGER) will conduct most of the rebalancing trading on February 9 to avoid excessive tracking errors.</li>
<li>
LG Chem will face an outflow of ₩0.38T (0.8% of SO and 1.37x ADTV). LG Energy would be 0.36x ADTV and 0.31% of SO, assuming a DTV of 2M shares.</li>
<li>This is definitely a clear long/short setup opportunity: LG Energy LONG/LG Chem SHORT position. Alternatively, we can also consider approaching this event with Battery ETFs LONG/LG Chem Short setup.</li>
</ul>


There is recently a growing view that the ETF operators (KODEX and TIGER) will conduct most of the rebalancing trading on February 9 to avoid excessive tracking errors.

LG Chem will face an outflow of ₩0.38T (0.8% of SO and 1.37x ADTV). LG Energy would be 0.36x ADTV and 0.31% of SO, assuming a DTV of 2M shares.
This is definitely a clear long/short setup opportunity: LG Energy LONG/LG Chem SHORT position. Alternatively, we can also consider approaching this event with Battery ETFs LONG/LG Chem Short setup.


LG Energy & LG Chem Passive Flow In/Out Estimations & Trading Considerations on February 9

<ul>
<li>The screening period for the upcoming rebalancing is May 3-31. LG Energy satisfies the 3-month minimum listing requirement, so it becomes eligible to join the Index in this rebalancing.</li>
<li>LG Energy will likely receive an inflow of ₩44.6B, 0.04% of SO. Considering its tight real-world float (less than 6%), it would still be something we don't want to overlook.</li>
<li>What is critical is an estimated outflow size of Celltrion. It would be about the same amount, but relative to its ADTV, it will be -0.26x.</li>
</ul>


The screening period for the upcoming rebalancing is May 3-31. LG Energy satisfies the 3-month minimum listing requirement, so it becomes eligible to join the Index in this rebalancing.
LG Energy will likely receive an inflow of ₩44.6B, 0.04% of SO. Considering its tight real-world float (less than 6%), it would still be something we don't want to overlook.
What is critical is an estimated outflow size of Celltrion. It would be about the same amount, but relative to its ADTV, it will be -0.26x.


FnGuide TIGER Top 10 Rebalancing: LG Energy IN & Celltrion OUT

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

<ul>
<li>The review period for the KRX New Deal indices ended on 31 January. The changes will be announced toward the end of February and implemented on 10 March.</li>
<li>We expect <a href="https://www.smartkarma.com/entities/lg-energy-solution" target="_blank" data-smartkarma-citation="entities:33464:1" rel="noopener">LG Energy Solution (373220 KS)</a> to be included in the Battery and BBIG indices, while <a href="https://www.smartkarma.com/entities/kakao-pay-corp" target="_blank" data-smartkarma-citation="entities:29675:1" rel="noopener">Kakao Pay (377300 KS)</a> should be added to the Internet Index.</li>
<li>The largest selling is expected to be on <a href="https://www.smartkarma.com/entities/douzone-bizon-co-ltd" target="_blank" data-smartkarma-citation="entities:20161:1" rel="noopener">Douzone Bizon (012510 KS)</a> due to a potential downweight in the Internet index and a deletion from the BBIG index.</li>
</ul>


The review period for the KRX New Deal indices ended on 31 January. The changes will be announced toward the end of February and implemented on 10 March.
We expect LG Energy Solution (373220 KS) to be included in the Battery and BBIG indices, while Kakao Pay (377300 KS) should be added to the Internet Index.
The largest selling is expected to be on Douzone Bizon (012510 KS) due to a potential downweight in the Internet index and a deletion from the BBIG index.


KRX New Deal Index Rebalance Preview (March): More Flow for LG Energy

South Korea

LG Chem Ltd. is a chemical manufacturer. The Company's products include petrochemicals, plastic resins, and engineering plastics. LG Chem also produces industrial and electronic materials.

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LG Chem (051915 KS)

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Solactive Global Lithium Index (LIT): Earlier Implementation Expected for LG Energy & LG Chem

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LG Energy & LG Chem Passive Flow In/Out Estimations & Trading Considerations on February 9

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FnGuide TIGER Top 10 Rebalancing: LG Energy IN & Celltrion OUT

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