Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Douglas Research Advisory

Event-Driven

<ul>
<li>After the market close on 9 May, Netmarble announced that it plans to sell 2.6% stake in HYBE for 219.9 billion won. </li>
<li>The transaction is based on PRS (price return swap) basis. Previous to this deal, Netmarble sold 2.5 million shares (about 6%) of HYBE shares in November 2023. </li>
<li>We continue to remain negative on HYBE including on this deal involving Netmarble's plan to sell additional 2.6% stake in HYBE.</li>
</ul>


After the market close on 9 May, Netmarble announced that it plans to sell 2.6% stake in HYBE for 219.9 billion won. 
The transaction is based on PRS (price return swap) basis. Previous to this deal, Netmarble sold 2.5 million shares (about 6%) of HYBE shares in November 2023. 
We continue to remain negative on HYBE including on this deal involving Netmarble's plan to sell additional 2.6% stake in HYBE.


Netmarble Plans to Sell 2.6% Stake in HYBE Through PRS (Price Return Swap).

Equity Bottom-Up

<ul>
<li>A nasty power struggle between ADOR CEO Min Hee-Jin and HYBE has erupted which is likely to continue to negatively impact HYBE's share price in the next several months.</li>
<li>ADOR CEO Min Hee-Jin owns an 18% stake in ADOR which was founded in 2021. HYBE owns the controlling 80% stake in ADOR.</li>
<li>Given the nasty fight between ADOR and HYBE, it is likely that the two companies (including ADOR's CEO Min Hee-Jin) are likely to part their ways.</li>
</ul>


A nasty power struggle between ADOR CEO Min Hee-Jin and HYBE has erupted which is likely to continue to negatively impact HYBE's share price in the next several months.
ADOR CEO Min Hee-Jin owns an 18% stake in ADOR which was founded in 2021. HYBE owns the controlling 80% stake in ADOR.
Given the nasty fight between ADOR and HYBE, it is likely that the two companies (including ADOR's CEO Min Hee-Jin) are likely to part their ways.


A Nasty Power Struggle Between ADOR CEO and HYBE

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.

<ul>
<li>KRX limits individual stock weight to 20% in ETFs with few constituents. KRX confirms working on it, with an official announcement expected soon.</li>
<li>Excludes index ETFs like KOSPI 200. KRX hasn't finalized criteria for constituent number but expected to involve fewer than 30 stocks.</li>
<li>This could open new passive trading opportunities. Sector ETF cap at 30%, large AUM ones offer noteworthy trading potential.</li>
</ul>


KRX limits individual stock weight to 20% in ETFs with few constituents. KRX confirms working on it, with an official announcement expected soon.
Excludes index ETFs like KOSPI 200. KRX hasn't finalized criteria for constituent number but expected to involve fewer than 30 stocks.
This could open new passive trading opportunities. Sector ETF cap at 30%, large AUM ones offer noteworthy trading potential.


KRX Imposes a 20% Cap on Weight Ceiling in Sector ETFs with Few Constituents

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>Following the short sell ban announced on the weekend, 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</a> and <a href="https://www.smartkarma.com/entities/kosdaq-150-index" target="_blank" data-smartkarma-citation="entities:31077:1" rel="noopener">KOSDAQ 150</a> opened higher on Monday and rallied through the day.</li>
<li>A lot of the intraday gains on Monday have been given up over the next two trading days. Surprisingly, KRX data indicates that not a lot of shorts have covered.</li>
<li>Foreigners have been net cash buyers since Monday (could indicate covering of offshore borrow) while retail were big sellers on Monday.</li>
</ul>


Following the short sell ban announced on the weekend, the KOSPI 200 and KOSDAQ 150 opened higher on Monday and rallied through the day.
A lot of the intraday gains on Monday have been given up over the next two trading days. Surprisingly, KRX data indicates that not a lot of shorts have covered.
Foreigners have been net cash buyers since Monday (could indicate covering of offshore borrow) while retail were big sellers on Monday.


Korea Short Sell Ban: Not a Lot Covered on Monday; Shorts Holding On?

Korea Stock Exchange KOSPI 200 / Event-Driven

<ul>
<li>Korea banned all short selling in March 2020 and resumed short selling only on <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">KOSPI 200</a> and <a href="https://www.smartkarma.com/entities/kosdaq-150-index" target="_blank" data-smartkarma-citation="entities:31077:1" rel="noopener">KOSDAQ 150</a> index constituents in May 2021.</li>
<li>News reports indicate that there could be another short sell ban as soon as the coming week. Indications are that the ban could last 6 months.</li>
<li>There are many implications of a total short sell ban including futures backwardation, market manipulation, and no emerging to developed market promotion.</li>
</ul>


Korea banned all short selling in March 2020 and resumed short selling only on KOSPI 200 and KOSDAQ 150 index constituents in May 2021.
News reports indicate that there could be another short sell ban as soon as the coming week. Indications are that the ban could last 6 months.
There are many implications of a total short sell ban including futures backwardation, market manipulation, and no emerging to developed market promotion.


Korea Short Sell Ban: Background, Manipulation, Holdings, Flows, Short Interest, Implications

South Korea

HYBE Co., Ltd. operates as an entertainment company. The Company provides music production, album distribution, entertainers management, publicity, planning, training, and other services. HYBE also makes television shows.

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HYBE (352820 KS)

Netmarble Plans to Sell 2.6% Stake in HYBE Through PRS (Price Return Swap).

After the market close on 9 May, Netmarble announced that it plans to sell 2.6% stake in HYBE for 219.9 billion won. We continue to remain negative...

Douglas Kim

A Nasty Power Struggle Between ADOR CEO and HYBE

Given the nasty fight between ADOR and HYBE, it is likely that they (including ADOR's CEO Min Hee-Jin) are likely to part their ways, although the...

Douglas Kim

KRX Imposes a 20% Cap on Weight Ceiling in Sector ETFs with Few Constituents

This post details what I confirmed with KRX regarding its new rule of imposing a 20% cap on the weight ceiling for the sector ETFs having few...

Sanghyun Park

Korea Short Sell Ban: Not a Lot Covered on Monday; Shorts Holding On?

Not a lot of shorts were covered on Monday. There could be more covering in the near term as the market drifts lower. KOSPI200 underperformed...

Brian Freitas

Korea Short Sell Ban: Background, Manipulation, Holdings, Flows, Short Interest, Implications

Media reports indicate that there could be a temporary short sell ban in Korea. This could lead to futures backwardation, market manipulation and a...

Brian Freitas

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