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>From early June until yesterday, local pension funds have purchased nearly 4% of DB HiTek's SO. This places DB HiTek in a dominant first position in their net buying list.</li>
<li>The timing of local pension funds beginning to buy DB HiTek coincidentally aligns with May 22, when DB Inc was requested by the KFTC to transition into a holding company.</li>
<li>Focus on potential price impact from DB Inc.'s buying and value-up index inflows. Considering a relative overweight in DB HiTek may be strategic despite some risk.</li>
</ul>


From early June until yesterday, local pension funds have purchased nearly 4% of DB HiTek's SO. This places DB HiTek in a dominant first position in their net buying list.
The timing of local pension funds beginning to buy DB HiTek coincidentally aligns with May 22, when DB Inc was requested by the KFTC to transition into a holding company.
Focus on potential price impact from DB Inc.'s buying and value-up index inflows. Considering a relative overweight in DB HiTek may be strategic despite some risk.


Trading Situation Arising from Local Pensions' Unusual Buying of DB HiTek

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Douglas Research Advisory

<ul>
<li>DB Hitek's investment in a golf course operating company is a poor investment, one that destroys shareholder value.</li>
<li>Most investors would rather have DB Hitek increase shareholder returns through share buybacks/cancellations and dividends as well as invest in its core semiconductor business rather then buy a golf course. </li>
<li>Given DB Inc's lack of cash, there is a growing possibility that it will use the proceeds from selling its DB World shares to increase its stake in DB Hitek. </li>
</ul>


DB Hitek's investment in a golf course operating company is a poor investment, one that destroys shareholder value.
Most investors would rather have DB Hitek increase shareholder returns through share buybacks/cancellations and dividends as well as invest in its core semiconductor business rather then buy a golf course. 
Given DB Inc's lack of cash, there is a growing possibility that it will use the proceeds from selling its DB World shares to increase its stake in DB Hitek. 


DB Hitek: Buying a Golf Course Overshadows Corporate Value Up Efforts

<ul>
<li>Unexpectedly, KRX included Cosmo AM&amp;T (005070 KS) despite not meeting the market cap cutoff and excluded DB Hitek (000990 KS) and Lotte Energy Materials (020150 KS).</li>
<li>Cosmo AM&amp;T's unexpected inclusion triggers a significant one-day passive flow event through the KOSPI 200 IT, the sector index with the largest AUM.</li>
<li>Sector index rebalancing, a single-day event managed by one ETF operator, more significantly correlates flow direction with price impact. We should consider a long-short setup for these on June 13th.</li>
</ul>


Unexpectedly, KRX included Cosmo AM&amp;T (005070 KS) despite not meeting the market cap cutoff and excluded DB Hitek (000990 KS) and Lotte Energy Materials (020150 KS).
Cosmo AM&amp;T's unexpected inclusion triggers a significant one-day passive flow event through the KOSPI 200 IT, the sector index with the largest AUM.
Sector index rebalancing, a single-day event managed by one ETF operator, more significantly correlates flow direction with price impact. We should consider a long-short setup for these on June 13th.


Unexpected Inclusion of Cosmo AM&T in KOSPI 200 Sparks Notable One-Day Flow Via KOSPI 200 IT

<ul>
<li>The index focuses on qualitative factors like capital efficiency and shareholder returns, but efforts to impose sector balance may have overextended its market benchmark role.</li>
<li>Some companies not fitting the 'value-up' narrative got included, while market favorites were sidelined by sector rankings, which is puzzling given the index's original goal.</li>
<li>Still, with rebalancing cut down to once a year, we should expect the flow impact on the index names to hit harder than initially thought compared to their sector peers.</li>
</ul>


The index focuses on qualitative factors like capital efficiency and shareholder returns, but efforts to impose sector balance may have overextended its market benchmark role.
Some companies not fitting the 'value-up' narrative got included, while market favorites were sidelined by sector rankings, which is puzzling given the index's original goal.
Still, with rebalancing cut down to once a year, we should expect the flow impact on the index names to hit harder than initially thought compared to their sector peers.


All the Scoop on the Korea Value-Up Index

Equity Bottom-Up

<ul>
<li>In this insight, we highlight the recent pricing gap divergences of the major Korean holdcos and opcos which could provide trading opportunities in 4Q 2024.</li>
<li>Volatility has been high in the Korean stock market in the past several weeks resulting in some interesting widening of some gaps among numerous holdcos and opcos in Korea. </li>
<li>Of the 38 pair trades, 19 of them involved holdcos outperforming opcos in the past six months and the other 19 opcos outperforming holdcos in the same period. </li>
</ul>


In this insight, we highlight the recent pricing gap divergences of the major Korean holdcos and opcos which could provide trading opportunities in 4Q 2024.
Volatility has been high in the Korean stock market in the past several weeks resulting in some interesting widening of some gaps among numerous holdcos and opcos in Korea. 
Of the 38 pair trades, 19 of them involved holdcos outperforming opcos in the past six months and the other 19 opcos outperforming holdcos in the same period. 


Korean Holdcos Vs Opcos Gap Trading Opportunities in 4Q 2024

South Korea

DB Hitek Co., Ltd. manufactures system semiconductor and provides foundry services. The Company's products inculde fabricated wafer and integrated circuits for mobile handsets and flat panel LCDs.

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DB Hitek Co., Ltd. (000990 KS)

Trading Situation Arising from Local Pensions' Unusual Buying of DB HiTek

This post explores the reasons for the local pension funds' unusually high purchasing of DB HiTek over the past two months and identifies potential...

Sanghyun Park

DB Hitek: Buying a Golf Course Overshadows Corporate Value Up Efforts

DB Hitek's investment in a golf course destroys shareholder value. There is a growing possibility that DB Inc will use the proceeds from selling...

Douglas Kim

Unexpected Inclusion of Cosmo AM&T in KOSPI 200 Sparks Notable One-Day Flow Via KOSPI 200 IT

This post explores the one-day flow trading event in the KOSPI 200 IT Sector Index, stemming from Cosmo AM&T's unexpected inclusion in the KOSPI...

Sanghyun Park

All the Scoop on the Korea Value-Up Index

This post breaks down everything we need to know about the Korea Value-up Index that KRX just unveiled today, especially focusing on those...

Sanghyun Park

Korean Holdcos Vs Opcos Gap Trading Opportunities in 4Q 2024

In this insight, we highlight the recent pricing gap divergences of the major Korean holdcos and opcos which could provide trading opportunities in...

Douglas Kim

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