Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Cross Asset Strategy

The Korea Exchange announced its KOSDAQ150 and KRX300 indices rebalances today. There were 17 new additions and 17 deletions for KOSDAQ150. Most of the stocks that were expected to be included in KOSDAQ 150 were officially included in the rebalance. However there were a few surprises. For example <a href="https://www.smartkarma.com/entities/nanos-co-ltd" target="_blank" data-smartkarma-citation="entities:16796:1" rel="noopener">Nanos Co Ltd (151910 KS),</a>which was one of the stocks that was expected to be included in KOSDAQ150, did not get included in this indext this time. On the other hand, the following stocks including <a href="https://www.smartkarma.com/entities/sang-a-frontec-co-ltd" target="_blank" data-smartkarma-citation="entities:20692:1" rel="noopener">Sang A Frontec (089980 KS)</a>, Novarex (194700 KS(, CIS (222080 KS), MedPacto (215980 KS), <a href="https://www.smartkarma.com/entities/koreacenter-com-co-ltd" target="_blank" data-smartkarma-citation="entities:28329:1" rel="noopener">Koreacenter.com Co Ltd (290510 KS)</a>, and Soulbrain (357780 KS) which were not on the top of the lists of getting selected into the KOSDAQ150 index by the locals, were formally selected be part of the new KOSDAQ150 inclusions.  The Korea Exchange also made changes to the KRX300 index. Although the KRX300 index is not currently as important as KOSPI200 and KOSDAQ150 indices, it is increasingly gaining in importance among the local institutional investors. The KRX300 had 33 new additions and 35 deletions.

The Korea Exchange announced its KOSDAQ150 and KRX300 indices rebalances today. There were 17 new additions and 17 deletions for KOSDAQ150. Most of the stocks that were expected to be included in KOSDAQ 150 were officially included in the rebalance. However there were a few surprises. For example Nanos Co Ltd (151910 KS),which was one of the stocks that was expected to be included in KOSDAQ150, did not get included in this indext this time. On the other hand, the following stocks including Sang A Frontec (089980 KS), Novarex (194700 KS(, CIS (222080 KS), MedPacto (215980 KS), Koreacenter.com Co Ltd (290510 KS), and Soulbrain (357780 KS) which were not on the top of the lists of getting selected into the KOSDAQ150 index by the locals, were formally selected be part of the new KOSDAQ150 inclusions.  The Korea Exchange also made changes to the KRX300 index. Although the KRX300 index is not currently as important as KOSPI200 and KOSDAQ150 indices, it is increasingly gaining in importance among the local institutional investors. The KRX300 had 33 new additions and 35 deletions. 

KOSDAQ150 and KRX300 Indices Rebalances (Overlapping Additions & Deletions)

KRX announced the rebalance to the KOSPI200 index today. There was not much surprise among the new 10 additions, which included stocks such as Samyang Foods, Zinus, and Kiwoom Securities. However, there was some surprises among the deletions including Unid, <a href="https://www.smartkarma.com/entities/dong-a-socio-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:4271:1" rel="noopener">Dong A Socio Holdings (000640 KS), </a>and <a href="https://www.smartkarma.com/entities/dong-a-st-co-ltd" target="_blank" data-smartkarma-citation="entities:16873:1" rel="noopener">Dong A St (170900 KS)</a>.Among the newly included companies, in terms of their fundamental business outlook and reasonable valuations, we think Samyang Foods, Zinus, and Hanwha Systems fit into these categories. We would be cautious on Big Hit Entertainment, CS Wind, and Shinpoong Pharm as we think there could be some sellers on investors that trade on the "sell on news" strategy of being included in KOSPI 200.

KRX announced the rebalance to the KOSPI200 index today. There was not much surprise among the new 10 additions, which included stocks such as Samyang Foods, Zinus, and Kiwoom Securities. However, there was some surprises among the deletions including Unid, Dong A Socio Holdings (000640 KS), and Dong A St (170900 KS).Among the newly included companies, in terms of their fundamental business outlook and reasonable valuations, we think Samyang Foods, Zinus, and Hanwha Systems fit into these categories. We would be cautious on Big Hit Entertainment, CS Wind, and Shinpoong Pharm as we think there could be some sellers on investors that trade on the "sell on news" strategy of being included in KOSPI 200.  

KOSPI 200 Index Rebalances: No Surprises Among Additions, A Few Surprises Among Deletions

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

The KRX has announced the list of inclusions and exclusions 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> today. The rebalance is effective after the close of trading on 10 December.There are 10 inclusions and 10 exclusions in the December 2020 review with an estimated one-way turnover of 1.06%.The inclusions and exclusions are:<table class="table table-striped">
<colgroup><col span="4"></colgroup>
<tbody>
<tr>
<td colspan="2" style="text-align: center; width: 96pt;"><h3>Inclusions</h3></td>
<td colspan="2" style="text-align: center; width: 96pt;"><h3>Exclusions</h3></td>
</tr>
<tr>
<td>Code</td>
<td>Name</td>
<td>Code</td>
<td>Name</td>
</tr>
<tr>
<td>003090.KS</td>
<td>Daewoong Co Ltd</td>
<td>000640.KS</td>
<td>Dong-A Socio Holdings Co Ltd</td>
</tr>
<tr>
<td>003230.KS</td>
<td>Samyang Foods Co Ltd</td>
<td>001430.KS</td>
<td>SeAH Besteel Corp</td>
</tr>
<tr>
<td>008350.KS</td>
<td>Namsun Aluminium Co Ltd</td>
<td>002270.KS</td>
<td>Lotte Foods Co Ltd</td>
</tr>
<tr>
<td>013890.KS</td>
<td>Zinus Inc</td>
<td>014830.KS</td>
<td>Unid Co Ltd</td>
</tr>
<tr>
<td>019170.KS</td>
<td>Shinpoong Pharmaceutical Co Ltd</td>
<td>019680.KS</td>
<td>Daekyo Co Ltd</td>
</tr>
<tr>
<td>039490.KS</td>
<td>KIWOOM Securities Co Ltd</td>
<td>025860.KS</td>
<td>Namhae Chemical Corp</td>
</tr>
<tr>
<td>112610.KS</td>
<td>CS Wind Corp</td>
<td>027410.KS</td>
<td>BGF Co Ltd</td>
</tr>
<tr>
<td>272210.KS</td>
<td>Hanwha Systems Co Ltd</td>
<td>060980.KS</td>
<td>Halla Holdings Corp</td>
</tr>
<tr>
<td>336260.KS</td>
<td>Doosan Fuel Cell Co Ltd</td>
<td>093050.KS</td>
<td>LF Corp</td>
</tr>
<tr>
<td>352820.KS</td>
<td>Big Hit Entertainment Co Ltd</td>
<td>170900.KS</td>
<td>Dong-A ST Co Ltd</td>
</tr>
</tbody>
</table>There are 11 trading days to implementation and there are quite a few deletes that have over 3-4 days of ADV to trade. The impact on the inclusions is smaller but there will be a lot of active funds looking to buy the stocks so they don't deviate too much from their benchmark.

The KRX has announced the list of inclusions and exclusions to the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) today. The rebalance is effective after the close of trading on 10 December.There are 10 inclusions and 10 exclusions in the December 2020 review with an estimated one-way turnover of 1.06%.The inclusions and exclusions are:



Inclusions
Exclusions


Code
Name
Code
Name


003090.KS
Daewoong Co Ltd
000640.KS
Dong-A Socio Holdings Co Ltd


003230.KS
Samyang Foods Co Ltd
001430.KS
SeAH Besteel Corp


008350.KS
Namsun Aluminium Co Ltd
002270.KS
Lotte Foods Co Ltd


013890.KS
Zinus Inc
014830.KS
Unid Co Ltd


019170.KS
Shinpoong Pharmaceutical Co Ltd
019680.KS
Daekyo Co Ltd


039490.KS
KIWOOM Securities Co Ltd
025860.KS
Namhae Chemical Corp


112610.KS
CS Wind Corp
027410.KS
BGF Co Ltd


272210.KS
Hanwha Systems Co Ltd
060980.KS
Halla Holdings Corp


336260.KS
Doosan Fuel Cell Co Ltd
093050.KS
LF Corp


352820.KS
Big Hit Entertainment Co Ltd
170900.KS
Dong-A ST Co Ltd


There are 11 trading days to implementation and there are quite a few deletes that have over 3-4 days of ADV to trade. The impact on the inclusions is smaller but there will be a lot of active funds looking to buy the stocks so they don't deviate too much from their benchmark.

KOSPI200 Index Rebalance: No Surprises Here, but Decent Impact Expected

Equity Bottom-Up

In our view, on Monday (16 November) when Big Hit Entertainment's one-month locked-up period ended shares could be sold, we think that its share price could decline by about 5-10%+.Warner Music Group's EV/EBITDA is 22x, which is nearly 37% lower than Bit Hit's current EV/EBITDA multiple. We do not believe is much higher EV/EBITDA multiple premium for Big Hit Entertainment is appropriate versus Warner Music Group. Given the continued concerns about the selling by the institutional investors (who want to lock in their gains after the lock-up period ends), Kakao Games' share price could face continued weakness leading up to the end of the 3-months lock-up period.

In our view, on Monday (16 November) when Big Hit Entertainment's one-month locked-up period ended shares could be sold, we think that its share price could decline by about 5-10%+.Warner Music Group's EV/EBITDA is 22x, which is nearly 37% lower than Bit Hit's current EV/EBITDA multiple. We do not believe is much higher EV/EBITDA multiple premium for Big Hit Entertainment is appropriate versus Warner Music Group. Given the continued concerns about the selling by the institutional investors (who want to lock in their gains after the lock-up period ends), Kakao Games' share price could face continued weakness leading up to the end of the 3-months lock-up period. 

End of the Lock-Up Periods for Big Hit Entertainment & Kakao Games

October continued to see sector rotation in Korea with growth-oriented stocks under performing value-oriented stocks. The following were the top 10 issues related to Korean stock market, economy, and politics in October 2020.1) DEATH OF SAMSUNG GROUP CHAIRMAN LEE KUN HEE2) BIG HIT ENTERTAINMENT IPO3) REGULATORS GOING AFTER THE OPTIMUS FUNDS 4) MAJOR POTENTIAL CHANGE IN TAX LAWS THAT COULD RESULT IN BIG SELLING BY RETAIL IN DECEMBER 5) LG CHEM APPROVES TO SEPARATE THE BATTERY BUSINESS 6) STRATEGIC PARTNERSHIP BETWEEN NAVER &amp; THE CJ GROUP7) SK TELECOM SPINS OFF MOBILITY BUSINESS &amp; PARTNERS WITH UBER 8) PAYPAL ALLOWS TRANSACTIONS IN CRYPTOS 9) INCREASED NEWS FLOW ABOUT THE NEED TO RECOUNT VOTES OF 4.15 (15 April 2020) PARLIAMENTARY ELECTION 10) SOCAR BECOMES THE NEXT UNICORN

October continued to see sector rotation in Korea with growth-oriented stocks under performing value-oriented stocks. The following were the top 10 issues related to Korean stock market, economy, and politics in October 2020.1) DEATH OF SAMSUNG GROUP CHAIRMAN LEE KUN HEE2) BIG HIT ENTERTAINMENT IPO3) REGULATORS GOING AFTER THE OPTIMUS FUNDS 4) MAJOR POTENTIAL CHANGE IN TAX LAWS THAT COULD RESULT IN BIG SELLING BY RETAIL IN DECEMBER 5) LG CHEM APPROVES TO SEPARATE THE BATTERY BUSINESS 6) STRATEGIC PARTNERSHIP BETWEEN NAVER &amp; THE CJ GROUP7) SK TELECOM SPINS OFF MOBILITY BUSINESS &amp; PARTNERS WITH UBER 8) PAYPAL ALLOWS TRANSACTIONS IN CRYPTOS 9) INCREASED NEWS FLOW ABOUT THE NEED TO RECOUNT VOTES OF 4.15 (15 April 2020) PARLIAMENTARY ELECTION 10) SOCAR BECOMES THE NEXT UNICORN 

Korea Stock Market Monthly Recap #53 (October 2020)

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)

KOSDAQ150 and KRX300 Indices Rebalances (Overlapping Additions & Deletions)

We highlight the KOSDAQ150 and KRX300 indices rebalances. There are some interesting new names, especially among those that are over lapping in...

Douglas Kim

KOSPI 200 Index Rebalances: No Surprises Among Additions, A Few Surprises Among Deletions

KRX anounced its KOSPI200 index rebalance. There were no surprises among the new additions but a few surprises among the deletions.

Douglas Kim

KOSPI200 Index Rebalance: No Surprises Here, but Decent Impact Expected

There are 10 inclusions and exclusions in the KOSPI200 and there is significant impact expected some of the stocks. We feel the inclusions could...

Brian Freitas

End of the Lock-Up Periods for Big Hit Entertainment & Kakao Games

In our view, on Monday (16 November) when Big Hit Entertainment's one-month locked-up period ended shares could be sold, we think that its share...

Douglas Kim

Korea Stock Market Monthly Recap #53 (October 2020)

In this insight, it provides the summary of the top 10 issues related to Korean stock market, economy, and politics in October 2020.

Douglas Kim

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