Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<ul>
<li>The reduction of credit loans by Korea Investment &amp; Securities and Kiwoom Securities in the past week may have accelerated unwinding of positions of 8 stocks related to CFD selling.  </li>
<li>The balance of credit loans for KOSPI increased 12.7% YTD. On the other hand, the balance of credit loans for KOSDAQ increased by 36.1% YTD. </li>
<li>As local securities companies further reduce credit loans and regulators also restrict CFD related leverage, a sound pair trade could be to go long KOSPI 200 and short KOSDAQ 150. </li>
</ul>


The reduction of credit loans by Korea Investment &amp; Securities and Kiwoom Securities in the past week may have accelerated unwinding of positions of 8 stocks related to CFD selling.  
The balance of credit loans for KOSPI increased 12.7% YTD. On the other hand, the balance of credit loans for KOSDAQ increased by 36.1% YTD. 
As local securities companies further reduce credit loans and regulators also restrict CFD related leverage, a sound pair trade could be to go long KOSPI 200 and short KOSDAQ 150. 


Korea Investment & Securities' Suspension of Credit Loans for Stock Purchases - The Trigger Event?

Equity Bottom-Up

<ul>
<li>The biggest story in the Korean stock market in the past three days has been the crash in 8 stocks related to CFD derivatives.</li>
<li>As a result of the CFD related margin call selling, the following are the major impact on the 8 related stocks and the overall Korean stock market in our view.</li>
<li>They include a) overshooting on the downside on 8 related names, b) negative impact on the major rechargeable battery names, and c) negative impact on the overall Korean stock market. </li>
</ul>


The biggest story in the Korean stock market in the past three days has been the crash in 8 stocks related to CFD derivatives.
As a result of the CFD related margin call selling, the following are the major impact on the 8 related stocks and the overall Korean stock market in our view.
They include a) overshooting on the downside on 8 related names, b) negative impact on the major rechargeable battery names, and c) negative impact on the overall Korean stock market. 


A Crash in 8 Korean Stocks Related to CFD Derivatives: Margin Call in Korea

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>The local ghost hedge fund began to excessively invest in credit, which leveraged 2.5 to 3 times when the eight manipulated stocks started to increase rapidly in price.</li>
<li>Then, the Financial Supervisory Service deemed this excessively-leveraged trading behavior as unusual, and news of an investigation into their activities broke out and triggered them to dump the shares.</li>
<li>The key now is identifying in advance the stocks that will experience similar selling patterns. To do so, we need to prioritize selecting stocks with high-margin balances in recent times.</li>
</ul>


The local ghost hedge fund began to excessively invest in credit, which leveraged 2.5 to 3 times when the eight manipulated stocks started to increase rapidly in price.
Then, the Financial Supervisory Service deemed this excessively-leveraged trading behavior as unusual, and news of an investigation into their activities broke out and triggered them to dump the shares.
The key now is identifying in advance the stocks that will experience similar selling patterns. To do so, we need to prioritize selecting stocks with high-margin balances in recent times.


Matched Order Fraud in Korea: Reason Behind Eight Stocks Hit Massively

<ul>
<li>NPS said it would add 50 KOSPI stocks to KOSPI 200 for direct management. However, the key was when this would be implemented and which ones would be included.</li>
<li>SBS, one of Korea's major networks, exclusively reported that NPS finalized the constituent stocks of the NPS-KR250 and started rebalancing trading on the 50 additional KOSPI stocks from January.</li>
<li>Hence, tracing and identifying who these additional 50 KOSPI stocks are is becoming the hottest topic in Korea's local market at this point.</li>
</ul>


NPS said it would add 50 KOSPI stocks to KOSPI 200 for direct management. However, the key was when this would be implemented and which ones would be included.
SBS, one of Korea's major networks, exclusively reported that NPS finalized the constituent stocks of the NPS-KR250 and started rebalancing trading on the 50 additional KOSPI stocks from January.
Hence, tracing and identifying who these additional 50 KOSPI stocks are is becoming the hottest topic in Korea's local market at this point.


Korea NPS Reportedly Finalized Additional 50 KOSPI Stocks in Its BM for Direct Management

<ul>
<li>Hankyung's report is a clear misunderstanding under the current index methodology. The possibility of Samchully and Daesung Holdings' KOSPI 200 inclusion is NONE.</li>
<li>However, the issue of deteriorating the market representation of the K200 index, which is caused by the top stocks outside the index, is gaining attention in the local financial space.</li>
<li>So, we should prepare for the possibility that KRX will revise the methodology. In this case, an intense preemptive flow for the top names outside the KOSPI 200 can appear.</li>
</ul>


Hankyung's report is a clear misunderstanding under the current index methodology. The possibility of Samchully and Daesung Holdings' KOSPI 200 inclusion is NONE.
However, the issue of deteriorating the market representation of the K200 index, which is caused by the top stocks outside the index, is gaining attention in the local financial space.
So, we should prepare for the possibility that KRX will revise the methodology. In this case, an intense preemptive flow for the top names outside the KOSPI 200 can appear.


Misunderstandings & Truth About Samchully & Daesung Holdings Entering KOSPI 200

South Korea

Daesung Holdings Co., Ltd., an energy company, specializes in distributing liquefied natural gas (LNG) in Daegu area.  The Company also provides pipe installation services. Daegu supplies gas for commercial, residential, and industrial purposes.

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Daesung Holdings (016710 KS)

Korea Investment & Securities' Suspension of Credit Loans for Stock Purchases - The Trigger Event?

The reduction of credit loans by Korea Investment & Securities and Kiwoom Securities in the past week may have accelerated unwinding of positions...

Douglas Kim

Matched Order Fraud in Korea: Reason Behind Eight Stocks Hit Massively

This post investigates and explains the matched order fraud incident that engulfed Korea's local stock market this week and the potential names...

Sanghyun Park

Korea NPS Reportedly Finalized Additional 50 KOSPI Stocks in Its BM for Direct Management

This post investigates the 50 additional KOSPI stocks that Korea NPS has reportedly chosen for its benchmark index for direct management, called...

Sanghyun Park

Misunderstandings & Truth About Samchully & Daesung Holdings Entering KOSPI 200

This post explains why Hankyung's report about Samchully and Daesung Holdings entering K200 is a misunderstanding. Still, it can lead to revising...

Sanghyun Park

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Korea Investment & Securities' Suspension of Credit Loans for Stock Purchases - The Trigger Event?

The reduction of credit loans by Korea Investment & Securities and Kiwoom Securities in the past week may have accelerated unwinding of positions...

Douglas Kim

A Crash in 8 Korean Stocks Related to CFD Derivatives: Margin Call in Korea

The biggest story in the Korean stock market in the past three days has been the crash in 8 stocks related to CFD derivatives. We discuss the major...

Douglas Kim

Matched Order Fraud in Korea: Reason Behind Eight Stocks Hit Massively

This post investigates and explains the matched order fraud incident that engulfed Korea's local stock market this week and the potential names...

Sanghyun Park

Korea NPS Reportedly Finalized Additional 50 KOSPI Stocks in Its BM for Direct Management

This post investigates the 50 additional KOSPI stocks that Korea NPS has reportedly chosen for its benchmark index for direct management, called...

Sanghyun Park

Misunderstandings & Truth About Samchully & Daesung Holdings Entering KOSPI 200

This post explains why Hankyung's report about Samchully and Daesung Holdings entering K200 is a misunderstanding. Still, it can lead to revising...

Sanghyun Park