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>KRX announced KOSDAQ Global rebalancing. Annually in June, effective date follows June options expiry. Passive flow trading on Thursday, the 13th. 49 companies designated, with nine excluded and eleven added.</li>
<li>Predicting passive capital movement is challenging, but attention must be given to price impacts because reshuffle predictability is low, lacking preemptive trading setups.</li>
<li>We must anticipate the SSF reshuffle in August, likely including new KOSDAQ Global constituents. KRX plans to list SSFs for all remaining constituents, potentially advancing setup timing for price increases.</li>
</ul>


KRX announced KOSDAQ Global rebalancing. Annually in June, effective date follows June options expiry. Passive flow trading on Thursday, the 13th. 49 companies designated, with nine excluded and eleven added.
Predicting passive capital movement is challenging, but attention must be given to price impacts because reshuffle predictability is low, lacking preemptive trading setups.
We must anticipate the SSF reshuffle in August, likely including new KOSDAQ Global constituents. KRX plans to list SSFs for all remaining constituents, potentially advancing setup timing for price increases.


KOSDAQ Global Rebalancing This Week: Trading Considerations

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 short interest of KRX Stocks as of Feb 16th which has an aggregated short interest worth USD7.9bn.</li>
<li>We tabulate league table for top short by value and short as multiple of ADT, as well as weekly increases &amp; decreases in short value, short as multiple of ADT.</li>
<li>We have highlighted short interest weekly changes in Enchem, HMM.</li>
</ul>


We analyzed the changes in short interest of KRX Stocks as of Feb 16th which has an aggregated short interest worth USD7.9bn.
We tabulate league table for top short by value and short as multiple of ADT, as well as weekly increases &amp; decreases in short value, short as multiple of ADT.
We have highlighted short interest weekly changes in Enchem, HMM.


KRX Short Interest Weekly (Feb 16th): Enchem, HMM

<ul>
<li>Futures backwardation resulting from the short selling ban will persist. Also, the contraction of market making will lead to more widespread and frequent occurrences of extreme spreads.</li>
<li>The straightforward sell arbitrage (reverse cash and carry) is no longer viable. We must pay attention to the emergence of new price and trading patterns driven by these market conditions.</li>
<li>One potential pattern is the possibility of spot buying centered around those that exhibited extreme spreads at expiration. This has already been observed to some extent in this month's expiration.</li>
</ul>


Futures backwardation resulting from the short selling ban will persist. Also, the contraction of market making will lead to more widespread and frequent occurrences of extreme spreads.
The straightforward sell arbitrage (reverse cash and carry) is no longer viable. We must pay attention to the emergence of new price and trading patterns driven by these market conditions.
One potential pattern is the possibility of spot buying centered around those that exhibited extreme spreads at expiration. This has already been observed to some extent in this month's expiration.


Understanding Extreme SSF Spreads in Korea & Trading Approaches

<ul>
<li>Based on the latest closing prices, the potential INs/OUTs are as follows. INs: Soulbrain &amp; Enchem / OUTs: Chunbo &amp; Solus Advanced Materials</li>
<li>While the overall market liquidity constraints due to the short-selling ban could exacerbate the price impact on the rebalancing day, it may reduce the flexibility of our Long-Short setup strategies.</li>
<li>While Chunbo carries single-stock futures, its liquidity may not be sufficient. So, a more creative Long-Short approach is required, taking into account these factors.</li>
</ul>


Based on the latest closing prices, the potential INs/OUTs are as follows. INs: Soulbrain &amp; Enchem / OUTs: Chunbo &amp; Solus Advanced Materials
While the overall market liquidity constraints due to the short-selling ban could exacerbate the price impact on the rebalancing day, it may reduce the flexibility of our Long-Short setup strategies.
While Chunbo carries single-stock futures, its liquidity may not be sufficient. So, a more creative Long-Short approach is required, taking into account these factors.


TIGER Battery Material ETF Rebal in December: Notable Changes in Constituent Screening

<ul>
<li>In the inaugural constituent selection, FnGuide revealed a noteworthy pattern. Given the smaller market capitalization of the electrolyte suppliers, FnGuide has included only the largest among them in this ETF.</li>
<li>SoulBrain, categorized by FnGuide as an electrolyte supplier like Chunbo, has significantly outperformed Chunbo. As a result, there is a considerable likelihood that SoulBrain will replace Chunbo in December.</li>
<li>The price impact from ETF rebalancing trading has disappeared substantially in Korea. We should focus on the first rebalancing of newly listed ETFs that haven't yet established a learning effect.</li>
</ul>


In the inaugural constituent selection, FnGuide revealed a noteworthy pattern. Given the smaller market capitalization of the electrolyte suppliers, FnGuide has included only the largest among them in this ETF.
SoulBrain, categorized by FnGuide as an electrolyte supplier like Chunbo, has significantly outperformed Chunbo. As a result, there is a considerable likelihood that SoulBrain will replace Chunbo in December.
The price impact from ETF rebalancing trading has disappeared substantially in Korea. We should focus on the first rebalancing of newly listed ETFs that haven't yet established a learning effect.


Overlooked by the Market: A Compelling Long Short Opportunity in Newly-Listed ETF Rebal in Korea

South Korea

Chunbo Co.,Ltd manufactures and sells chemical materials. The Company produces and sells display, semiconductor, and secondary battery application materials, as well as pharmaceutical intermediates and specialty chemicals. Chunbo markets its products worldwide.

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Chunbo (278280 KS)

KOSDAQ Global Rebalancing This Week: Trading Considerations

This post outlines today's announcement of the KOSDAQ Global Index rebalancing results and explores trading implications.

Sanghyun Park

KRX Short Interest Weekly (Feb 16th): Enchem, HMM

We have analyzed KRX short interest report for the past week and highlighted short interest weekly changes in Enchem, HMM.

Ke Yan, CFA, FRM

Understanding Extreme SSF Spreads in Korea & Trading Approaches

This post offers insights into the currently observed extreme spreads in the Korean single stock futures market and explores practical trading...

Sanghyun Park

TIGER Battery Material ETF Rebal in December: Notable Changes in Constituent Screening

This post explores the latest screening outcomes of the TIGER Secondary Battery Materials ETF rebalancing in December, highlighting significant...

Sanghyun Park

Overlooked by the Market: A Compelling Long Short Opportunity in Newly-Listed ETF Rebal in Korea

This post investigates the compelling Long Short opportunity of a newly-listed sector ETF rebalancing in Korea, which appears to be overlooked by...

Sanghyun Park

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