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>SK Square's market cap exceeds SK Networks' by over 10 times, qualifying this merger as small-scale. Thus, only SK Networks needs shareholder approval and grants appraisal rights solely to shareholders.</li>
<li>The current arbitrage spread for SK Networks' appraisal rights is 1.95%, and for the swap, it's 4.16%. These are nominal values excluding trading costs and taxes.</li>
<li>Today's SK Square and SK Networks prices reflect arbitrage spreads. Yesterday's 8% spread widened, focusing on narrowing appraisal rights and swap spreads, essential before next week's announcement.</li>
</ul>


SK Square's market cap exceeds SK Networks' by over 10 times, qualifying this merger as small-scale. Thus, only SK Networks needs shareholder approval and grants appraisal rights solely to shareholders.
The current arbitrage spread for SK Networks' appraisal rights is 1.95%, and for the swap, it's 4.16%. These are nominal values excluding trading costs and taxes.
Today's SK Square and SK Networks prices reflect arbitrage spreads. Yesterday's 8% spread widened, focusing on narrowing appraisal rights and swap spreads, essential before next week's announcement.


SK Square + SK Networks Merger Swap: A Guide to Pre-Merger Arb Spread Calculations

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Douglas Research Advisory

<ul>
<li>Starting 24 July, there will be a mandatory pre-announcement requirement for block deal sales in Korea. </li>
<li>In other words, the major shareholders of the Korean companies need to report publicly prior to their actual sales of their stakes in these companies through block deal sales.</li>
<li>The potential block deal sales candidates could continue to underperform on average the companies that are selling these stocks in potential block deal sales in the next several weeks. </li>
</ul>


Starting 24 July, there will be a mandatory pre-announcement requirement for block deal sales in Korea. 
In other words, the major shareholders of the Korean companies need to report publicly prior to their actual sales of their stakes in these companies through block deal sales.
The potential block deal sales candidates could continue to underperform on average the companies that are selling these stocks in potential block deal sales in the next several weeks. 


Mandatory Block Deal Pre-Announcement Requirement in Korea Starting 24 July: Impact on Block Deals

<ul>
<li>SK Group plans to merge SK Innovation and 90%-owned SK E&amp;S by month-end. Chosun Ilbo's report solidifies market confidence due to its credibility and likely intentional leak by SK Group.</li>
<li>Initially considered but deemed lower priority than SK IE Technology sale; SK Group opts for this alternative due to challenging market conditions for SKITE sale.</li>
<li>SK Innovation and SKIET rise with hopes of resolving liquidity issues and avoiding sacrifice. SK Inc is negatively impacted by concerns over valuation double counting from this merger.</li>
</ul>


SK Group plans to merge SK Innovation and 90%-owned SK E&amp;S by month-end. Chosun Ilbo's report solidifies market confidence due to its credibility and likely intentional leak by SK Group.
Initially considered but deemed lower priority than SK IE Technology sale; SK Group opts for this alternative due to challenging market conditions for SKITE sale.
SK Innovation and SKIET rise with hopes of resolving liquidity issues and avoiding sacrifice. SK Inc is negatively impacted by concerns over valuation double counting from this merger.


Digging into Chosun Ilbo's Report on SK Group's SK Innovation & SK E&S Merger Plans

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Quantitative Analysis

<ul>
<li>We analyzed the changes in foreign holdings of KRX Stocks as of Jun 14th which has an aggregated holding worth USD547.8bn.</li>
<li>We estimate that foreign flows to be inflows of USD1,575mln. We tabulate the league table for top changes by value for 1W/4W/1Y and top stocks held by foreign institutions.</li>
<li>We highlight foreign changes in Sk Hynix, Samsung Electronics, Hanmi Semicon, Kia.</li>
</ul>


We analyzed the changes in foreign holdings of KRX Stocks as of Jun 14th which has an aggregated holding worth USD547.8bn.
We estimate that foreign flows to be inflows of USD1,575mln. We tabulate the league table for top changes by value for 1W/4W/1Y and top stocks held by foreign institutions.
We highlight foreign changes in Sk Hynix, Samsung Electronics, Hanmi Semicon, Kia.


KRX Foreign Holding Weekly (Jun 14th): Sk Hynix, Samsung Electronics, Hanmi Semicon, Kia

<ul>
<li>On 11 June, the FSC announced that the restrictions on allocation of treasury shares as new shares post spin-offs is expected to be made into law in 2H 2024.</li>
<li>Meanwhile, starting <strong>1 July,</strong> the financial regulators will make it more difficult for Korean companies to conduct spin-offs that have separate allocation of treasury shares as new shares.</li>
<li>The top five stocks with highest percentage of treasury shares/outstanding shares are up on average 40.5% YTD. </li>
</ul>


On 11 June, the FSC announced that the restrictions on allocation of treasury shares as new shares post spin-offs is expected to be made into law in 2H 2024.
Meanwhile, starting 1 July, the financial regulators will make it more difficult for Korean companies to conduct spin-offs that have separate allocation of treasury shares as new shares.
The top five stocks with highest percentage of treasury shares/outstanding shares are up on average 40.5% YTD. 


Changes in Law for Allocation of Treasury Shares as New Shares Post Spin-Offs in Korea in 2H 2024

South Korea

Posco DX Company Ltd. provides information and technology services. The Company provides computer systems design, computer and server merchant wholesale, computer and office machine repair and maintenance services. Posco DX also offers eic engineering, smart factory, wireless networking equipment, steel manufacturing, and digital video recorder manufacturing services.

LG Display Co., Ltd. develops and manufactures digital display products.  The Company's products include thin film transistor-liquid crystal displays (TFT-LCD) for notebook and desktop computer monitors, TVs, mobile phones, and medical equipment.  LG Display provides its products mainly to overseas markets.

LG Innotek Co., Ltd. develops and produces cellular phone parts such as mini vibration motors, LCD modules, light emitting diode (LED), camera modules, protection circuit modules. The Company also manufactures liquid crystal displays (LCD) and plasma display panels (PDP) parts such as inverters, intelligent power modules, multi chip modules, and tuners.

Samsung SDS Co., Ltd. provides information technology services, such as consulting and technical services. The Company also offers outsourcing services including application outsourcing, IT infrastructure outsourcing, and cloud computing.

Samsung Electro-Mechanics Co., Ltd. manufactures a variety of electronic components used in computers, audio and video products, industrial electronics, and telecommunication equipment. The Company's products include multi-layer boards and capacitors, optical Pick Ups, deflection yokes (DY), keyboards, speakers, and light emitting diode (LED) products.

Samsung Electro Mechanics Co, Ltd. (009150 KS)

IsuPetasys Co., Ltd. manufactures printed circuit boards (PCBs) specializing in high multilayer PCBs.  The Company exports its products to Cisco Systems, Brocade Communications Systems, and Sun Microsystems in the United States.

NCSOFT Corporation develops and markets on-line games that enable users to play over the Internet and computer software, such as web editing software.  The Company also designs and constructs databases, Intranet, and commercial Internet access systems.

COSMOAM&T Co., Ltd. manufactures, sells, and exports blank video & audio recording tapes including back-coated tapes, high speed recordable tapes, and video head cleaners.  The Company also produces recordable and rewritable optical discs, such as compact discs (CD), mini discs (MD), and digital video discs (DVD).

LEENO Industrial Inc. develops and manufactures various testers.  The Company's products include integrated circuit (IC) test sockets, test probe pins used in semiconductor industry.

Hyundai Autoever Corp. provides information technology services. The Company offers system integration, system management, information system development, and other services. Hyundai Autoever offers services worldwide.

Zhejiang Chint Electrics Co., Ltd. manufactures low voltage electric appliances. The Company's products include high, Medium and low voltage electrical apparatus, power transmission and distribution equipment, and measuring meters and instruments.

Mercury Systems, Inc. designs, manufactures, and markets real-time digital signal processing computer systems.  The Company's systems transform sensor generated data into information which can be displayed as images for human interpretation or subjected to additional computer analysis.  Products are marketed to the defense electronics and medical diagnostic imaging businesses.

Xinte Energy Co., Limited solar-grade polysilicon producer and PV project contractor. The Company provides polysilcon production, sales of electricity, engineering and construction contracting, inverter manufacturing, and PV wafer and module manufacturing.

SUMCO Corporation manufactures silicon wafers for the semiconductor industry. The Company produces silicon wafers used to produce solar batteries as well as ultra-high purity quartz used to produce vessels for silicon manufacturing process. SUMCO markets its products worldwide.

Yandex NV operates an Internet website in Russia.  The Company's website offers an Internet search engine, news, shopping information, blogs, photographs and videos.  Yandex earns its revenues from online advertising.

Kingsoft Corporation Ltd. develops and markets computer software.  The Company develops role-playing computer games and security, word processing, and spreadsheet software.

Technology One Limited is an Australian-based company that is engaged in the development, marketing, sales, implementation, support, and distribution of financial management and enterprise software solutions. The Company has operations in New Zealand, the United Kingdom, the South Pacific, and Malaysia.

Axcelis Technologies, Inc. manufactures components for the semiconductor industry. The Company designs, manufactures and services ion implantation, dry strip, thermal processing and curing equipment used in the fabrication of semiconductor chips. Axcelis Technologies sells their products to semiconductor chip manufacturers worldwide.

MA-COM Technology Solutions Holdings Inc. provides high performance analog semiconductor solutions. The Company supplies semiconductors, active and passive components, and sub-assemblies for use in radio frequency, microwave, and millimeter wave applications. MA-COM Technology Solutions serves customers throughout the United States.

GMO Payment Gateway, Inc. provides credit card transaction services for electronic commerce firms.

SK Holdings Co., Ltd. is a holdings company that is engaged in various industries including energy, chemicals, information technology, semiconductors, marketing, and services businesses in South Korea and internationally.

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SK Inc (034730 KS)

SK Square + SK Networks Merger Swap: A Guide to Pre-Merger Arb Spread Calculations

This post is a guide to pre-merger arb trading setups for merger swap events in the Korean local market, considering this potential merger...

Sanghyun Park

Mandatory Block Deal Pre-Announcement Requirement in Korea Starting 24 July: Impact on Block Deals

According to Seoul Economic Daily, LG Chem has been tapping various institutional investors for a potential block deal sale of about 1 trillion won...

Douglas Kim

Digging into Chosun Ilbo's Report on SK Group's SK Innovation & SK E&S Merger Plans

This post investigates Chosun Ilbo's exclusive report on the SK Innovation and SK E&S merger plans, likely to be announced at SK Group's highest...

Sanghyun Park

KRX Foreign Holding Weekly (Jun 14th): Sk Hynix, Samsung Electronics, Hanmi Semicon, Kia

We analyzed KRX foreign holding data for the past week and highlighted foreign holding changes in Sk Hynix, Samsung Electronics, Hanmi Semicon, Kia.

Ke Yan, CFA, FRM

Changes in Law for Allocation of Treasury Shares as New Shares Post Spin-Offs in Korea in 2H 2024

On 11 June, the FSC announced that the restrictions on allocation of treasury shares as new shares post spin-offs is expected to be made into law...

Douglas Kim

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