Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Douglas Research Advisory

Equity Bottom-Up

<ul>
<li>One of the key themes this year that has worked well has been Korean food &amp; beverage stocks that have significantly outperformed KOSPI. </li>
<li>Some of the best selling Korean foods (especially overseas) include Samyang Foods' instant noodles, CJ Seafood's seaweed products, and Wooyang's frozen gimbab. </li>
<li>We prefer a basket approach to investing in Korean F&amp;B stocks. A basket of top 10 F&amp;B stocks in Korea has outperformed the market YTD and this outperformance could continue.</li>
</ul>


One of the key themes this year that has worked well has been Korean food &amp; beverage stocks that have significantly outperformed KOSPI. 
Some of the best selling Korean foods (especially overseas) include Samyang Foods' instant noodles, CJ Seafood's seaweed products, and Wooyang's frozen gimbab. 
We prefer a basket approach to investing in Korean F&amp;B stocks. A basket of top 10 F&amp;B stocks in Korea has outperformed the market YTD and this outperformance could continue.


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

Event-Driven

<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>The review period for the March rebalance of the KOSPI Size Indices ends 28 February. The results will be announced early March and implemented at the close on 9 March.</li>
<li>We see 5 migrations between MidCap and LargeCap, 8 migrations from SmallCap to MidCap, 3 new adds to MidCap, and 11 migrations from MidCap to SmallCap.</li>
<li>Stocks migrating from SmallCap to MidCap have outperformed stocks that are migrating between other categories.</li>
</ul>


The review period for the March rebalance of the KOSPI Size Indices ends 28 February. The results will be announced early March and implemented at the close on 9 March.
We see 5 migrations between MidCap and LargeCap, 8 migrations from SmallCap to MidCap, 3 new adds to MidCap, and 11 migrations from MidCap to SmallCap.
Stocks migrating from SmallCap to MidCap have outperformed stocks that are migrating between other categories.


KOSPI Size Indices - Potential Changes in March

<ul>
<li>On 23 March, it was announced that Lotte Confectionery (280360 KS) (market cap of 744 billion won) will merge with Lotte Food (002270 KS) (market cap of 395 billion won).</li>
<li>We believe this merger will have a positive impact on the shares of Lotte Confectionery and Lotte Food.</li>
<li>Lotte Confectionery and Lotte Food are not currently included in the KOSPI200. There will be a growing likelihood that the combined entity could be included in the KOSPI200 index. </li>
</ul>


On 23 March, it was announced that Lotte Confectionery (280360 KS) (market cap of 744 billion won) will merge with Lotte Food (002270 KS) (market cap of 395 billion won).
We believe this merger will have a positive impact on the shares of Lotte Confectionery and Lotte Food.
Lotte Confectionery and Lotte Food are not currently included in the KOSPI200. There will be a growing likelihood that the combined entity could be included in the KOSPI200 index. 


A Merger Between Lotte Confectionery and Lotte Food: An Alpha Generating Event

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.

What would be a real-world passive money size tracking KOSPI 200?My latest estimation is ₩80 trillion, and here is a breakdown of my estimation.ETFsWe currently have 17 local ETFs mirroring KOSPI 200, including KODEX 200 (₩5.5T) and TIGER 200 (₩2.3T). Their combined market value amounts to ₩16.5T.







Local ETFs directly mirroring KOSPI 200
Ticker
Market cap as of today (June 1, 2021)


YURIE TREX 200 ETF
108590
₩13.0B


Kiwoom KOSEF200 Total Return ETF
294400
₩493.3B


Kyobo AXA Power K200 ETF
152870
₩28.6B


Samsung KODEX 200 Total Return ETF
278530
₩1,470.5B


Mirae Asset TIGER Leverage ETF
123320
₩32.1B


KIM KINDEX Leverage ETF
152500
₩11.1B


HANWHA Arirang 200 ETF
152100
₩853.6B


Samsung KODEX 200 ETF
069500
₩5,446.8B


Kiwoom KOSEF200 ETF
069660
₩542.8B


Mirae Asset TIGER200 ETF
102110
₩2,283.6B


KIM KINDEX 200 ETF
105190
₩751.7B


Samsung KODEX Leverage Derivatives ETF
122630
₩1,722.2B


KB KBSTAR 200 Securities ETF
148020
₩1,168.8B


NH-Amundi HANARO 200 ETF
293180
₩655.5B


NH-Amundi HANARO 200TR ETF
332930
₩222.4B


KIM KINDEX 200TotalReturn ETF
332500
₩340.5B


Shinhan SMART 200 Total Return ETF
295040
₩449.9B


- Total
-
₩16,486.4B

Source: KRX

Index funds39 local index funds are currently tracking KOSPI 200, including the Kyobo AXA Power Index with an AUM of ₩1.3T. Their combined AUM totals ₩3.7T.






Local Index funds directly mirroring KOSPI 200
Assets under management as of today (June 1, 2021)


Kiwoom New Frontier Index Plus αF- 1 [Equity-Derivative] A1
₩17.5B


Kiwoom e-Alpha Index 1 [Equity]
₩11.0B


Kiwoom Korea Index 1 [Equity] C-e
₩28.1B


Kiwoom Korea Happy Pension Index 1 [Equity]
₩16.6B


Korea Investment Index Plus 1 [Equity-Derivative] (A)
₩28.4B


BNKK200 Index (Equity-Derivative) ClassA
₩25.4B


KB Star Power Index Korea [Equity-Derivative] C-E
₩18.3B


Hungkuk Index Alpha [Equity-Derivative] C-f
₩17.9B


Daishin Index Value [Equity] ClassC-F
₩130.5B


Mirae Asset Market Plus [Equity] Type F
₩11.8B


Consus Moebius 1 200 Index (Equity-Derivative) Class C
₩11.0B


IBKKOSPI200 Index 1 [Equity] Type A
₩39.8B


Truston Index Alpha s [Equity-Derivative] C
₩14.5B


Hyundai KOSPI 200 Index Type C-f
₩10.2B


DGB Index Plus 1 [Equity-Derivative] A
₩27.6B


Woori KOSPI200 Index 1 (Equity-Derivative) ClassC-e
₩49.1B


Kyobo AXA Power Index 2 [Equity] ClassA1
₩22.5B


East Spring Korea Index [Equity] Class C-F
₩207.0B


Mirae KOSPI 200 Index 1 [Equity] Type C-e
₩164.0B


Kyobo AXA Power Index 1 [Equity] Class A 1
₩332.0B


Kyobo AXA Power Index 3 [Equity] ClassA
₩12.6B


Daishin KOSPI200 Index [Equity-Derivative] ClassC1
₩64.1B


Kyobo AXA Power Index 1 (Equity-Derivative) ClassA
₩1,277.0B


DB Index Haeohreum Alpha [Equity-Derivative] ClassA
₩15.5B


Hana UBS Umbrella New Index K- 1 [Equity-Derivative] ClassC
₩12.9B


Samsung Retirement Pension Index 1 [Equity] C
₩138.7B


Korea Investment &amp; Cruise F2.8 Index [Equity] (A)
₩14.1B


KB Index Annuity [Equity] C
₩20.6B


Samsung Index Alpha 1 [Equity-Derivative] (A)
₩18.6B


Samsung Pension Korea Index [Equity-Derivative]
₩34.6B


Samsung Classic Index Pensions 1 [Equity] _C
₩180.6B


KB Star Korea Index [Equity] C-E class
₩88.8B


Samsung Premium Index A [Equity-Derivative]
₩74.2B


Hanwha Smart ++ Index [Equity] C / C2β
₩240.4B


Feynman Index Premium 2 [Equity-Derivative]
₩18.8B


Samsung Index Plus 1 [Equity-Derivative] (C 1)
₩49.7B


KB Star Korea Index [Equity-Derivative] C
₩54.1B


NH-Amundi Premier Index [Equity-Derivative] ClassA
₩26.7B


Hyundai Investment Index 1 Alpha [Equity-Derivative] C-I
₩135.5B


- Total
₩3,660.7B

Source: KG Zeroin

National Pension Service (NPS)Now, we need to add NPS. In 2019, the internal (direct) management accounted for 54.15% of the domestic equity, whereas the external (consignment) management was responsible for 45.85%. Only the internal management operates passive funds, which accounted for 33.75% of the total domestic equity.The total domestic equity at March-end of this year was ₩178.7T. Assuming the same 33.75% weight for the passive in the domestic equity churns out ₩60.3T for the local passive funds within the NPS. An assumed 70% of this ₩60.3T would be ₩42.2T, supposedly tracking KOSPI 200. 70% should be a conservative assumption as their BM index for domestic equity is KOSPI.









NPS asset allocation
FY2019, amount
FY2019, weight
FY2021 March, amount
Directly mirroring KOSPI 200 at an assumed 70% of the total passive funds


Internal (direct) management
₩71,612.1B





- Active
₩26,976.9B
20.40%




- Passive
₩44,635.2B
33.75%
₩60,301.4B
₩42,211.0B


External (consignment) management
₩60,641.9B





- Active
₩60,641.9B
45.85%




- Passive
₩0.0B
0.00%




Total domestic Equity
₩132,254.0B

₩178,673.0B


Source: NPS

Variable insurance index fundsLastly, we have variable insurance index funds. A vast majority of the local variable insurance index funds are tracking KOSPI 200. I don't have the latest figure, but the FY2019 year-end data (compiled by YONHAP INFOMAX) shows that the combined AUM of these funds amounted to about ₩17~18T.Given the relatively flat yearly growth among the local insurance companies, I don't expect to see a substantial change in the combined AUM last year. So, ₩18T would be a safe estimate.Adding all four spits out ₩80.4T, supposedly total local passive money mirroring KOSPI 200 at this point.
₩80T estimation breakdown

ETFs
₩16.5T


Index funds
₩3.7T


National Pension Service - Passive
₩42.2T


Variable Insurance Index funds
₩18.0T


 - Total
₩80.4T

Source: KG Zeroin, KRX, NPS, &amp; YONHAP INFOMAX


Why I Estimate Total Local Passive Money Tracking KOSPI 200 at ₩80T? Here Is a Breakdown

South Korea

Binggrae Co., Ltd. manufactures dairy food products.  The Company has cold-storage and frozen divisions.  Bonggrae's main items include Banana Flavoured Milk, yogurts, snacks and various types of ice cream.

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Binggrae Co Ltd (005180 KS)

Korean Food Goes Global

We prefer a basket approach to investing in Korean F&B stocks. A basket of top 10 F&B stocks in Korea has outperformed the market YTD and this...

Douglas Kim

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

KOSPI Size Indices - Potential Changes in March

The review period for the March rebal of the KOSPI Size Indices ends on 28 February. We see quite a lot of potential migrations. Some stocks could...

Brian Freitas

A Merger Between Lotte Confectionery and Lotte Food: An Alpha Generating Event

The merger between Lotte Confectionery and Lotte Food is an alpha generating event. There are numerous opportunities to streamline their operations...

Douglas Kim

Why I Estimate Total Local Passive Money Tracking KOSPI 200 at ₩80T? Here Is a Breakdown

This post provides a detailed breakdown of how I arrive at an estimated ₩80 trillion for the passive money tracking KOSPI 200.

Sanghyun Park

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