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>DGB Financial Group's market cap makes it virtually impossible to get deleted even with Kakao Pay's GICS change in this June rebalancing.</li>
<li>It's unclear whether this has damaged the price impact of K200 inclusion. Nevertheless, the intensity of the pre-rebalancing flow wasn't aggressive, possibly due to the combination of factors, including this.</li>
<li>This suggests the possibility of an intense price impact resulting from a more concentrated flow right before the effective date, so we should prepare a setup that considers this.</li>
</ul>


DGB Financial Group's market cap makes it virtually impossible to get deleted even with Kakao Pay's GICS change in this June rebalancing.
It's unclear whether this has damaged the price impact of K200 inclusion. Nevertheless, the intensity of the pre-rebalancing flow wasn't aggressive, possibly due to the combination of factors, including this.
This suggests the possibility of an intense price impact resulting from a more concentrated flow right before the effective date, so we should prepare a setup that considers this.


Clarifying Market's Inaccurate Constituent Change Forecast in K200 Rebalancing with GICS Revision

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<ul>
<li>In this insight, we discuss the potential new inclusions in KOSPI 200 rebalance in May 2023.</li>
<li>The five stocks that are potential inclusions in KOSPI 200 rebalance in May 2023 include Kumyang, Cosmo Chemical, Dentium, Jeju Air, and Youlchon Chemical. </li>
<li>Kumyang and Cosmo Chemical are up on average 177% YTD. We would not chase these two stocks as their share prices have already risen considerably. </li>
</ul>


In this insight, we discuss the potential new inclusions in KOSPI 200 rebalance in May 2023.
The five stocks that are potential inclusions in KOSPI 200 rebalance in May 2023 include Kumyang, Cosmo Chemical, Dentium, Jeju Air, and Youlchon Chemical. 
Kumyang and Cosmo Chemical are up on average 177% YTD. We would not chase these two stocks as their share prices have already risen considerably. 


Additional Potential Inclusions in KOSPI 200 Rebalance in May 2023

<ul>
<li>The Korea Exchange announced special changes in KOSPI 200 index.</li>
<li>Effective 3 April, <a href="https://www.smartkarma.com/entities/meritz-securities-co-ltd" target="_blank" data-smartkarma-citation="entities:19692:1" rel="noopener">Meritz Securities (008560 KS)</a> will be excluded from the KOSPI 200 index and <a href="https://www.smartkarma.com/entities/dgb-financial-group-inc" target="_blank" data-smartkarma-citation="entities:6138:1" rel="noopener">DGB Financial Group (139130 KS)</a> will replace it. </li>
<li>We think that there could be slightly better capital flow into DGB Financial as compared to other regional/smaller banks in Korea including BNK Financial</li>
</ul>


The Korea Exchange announced special changes in KOSPI 200 index.
Effective 3 April, Meritz Securities (008560 KS) will be excluded from the KOSPI 200 index and DGB Financial Group (139130 KS) will replace it. 
We think that there could be slightly better capital flow into DGB Financial as compared to other regional/smaller banks in Korea including BNK Financial


KOSPI 200: Special Changes & Rising Delinquency Ratios of Banks in Korea

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

<ul>
<li>As expected, <a href="https://www.smartkarma.com/entities/dgb-financial-group-inc" target="_blank" data-smartkarma-citation="entities:6138:1" rel="noopener">DGB Financial Group (139130 KS)</a> replaces <a href="https://www.smartkarma.com/entities/meritz-securities-co-ltd" target="_blank" data-smartkarma-citation="entities:19692:1" rel="noopener">Meritz Securities (008560 KS)</a> in 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> at the close on 31 March.</li>
<li>We estimate passive trackers will need to buy 5.15m shares (KRW 35.5bn; 12.1 days of ADV) of <a href="https://www.smartkarma.com/entities/dgb-financial-group-inc" target="_blank" data-smartkarma-citation="entities:6138:1" rel="noopener">DGB Financial Group (139130 KS)</a> at the close of trading on 31 March.</li>
<li>
<a href="https://www.smartkarma.com/entities/dgb-financial-group-inc" target="_blank" data-smartkarma-citation="entities:6138:1" rel="noopener">DGB Financial Group (139130 KS)</a> trades cheaper than its peers on forward PE and Price to Book. There could be relative outperformance over the next week.</li>
</ul>


As expected, DGB Financial Group (139130 KS) replaces Meritz Securities (008560 KS) in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the close on 31 March.
We estimate passive trackers will need to buy 5.15m shares (KRW 35.5bn; 12.1 days of ADV) of DGB Financial Group (139130 KS) at the close of trading on 31 March.

DGB Financial Group (139130 KS) trades cheaper than its peers on forward PE and Price to Book. There could be relative outperformance over the next week.


KOSPI200 Ad Hoc Index Rebalance: DGB Financial (139130 KS) To Replace Meritz Sec (008560 KS)

<ul>
<li>Kakao Pay's GICS sector movement from IT to FINANCIALS creates flow trading opportunities due to the subsequent transfer between KOSPI 200's sector sub-indices.</li>
<li>An outflow of ₩24.6B or 410K shares will occur. This is 0.6x ADTV. Given that the recent trading volume has further decreased, the actual impact will likely exceed 1.0x DTV.</li>
<li>It will be a concentrated flow in a single trading day by a single ETF, which gives us plenty of reasons for preemptively designing a short position targeting this.</li>
</ul>


Kakao Pay's GICS sector movement from IT to FINANCIALS creates flow trading opportunities due to the subsequent transfer between KOSPI 200's sector sub-indices.
An outflow of ₩24.6B or 410K shares will occur. This is 0.6x ADTV. Given that the recent trading volume has further decreased, the actual impact will likely exceed 1.0x DTV.
It will be a concentrated flow in a single trading day by a single ETF, which gives us plenty of reasons for preemptively designing a short position targeting this.


Shorting Kakao Pay on K200 Sector Index Passive Outflow Due to GICS Change on June 8

South Korea

DGB Financial Group Inc., a financial holding company, provides a full range of consumer and commercial banking-related financial services.  The Company operates and controls its financial subsidiaries such as Daegu Bank, Daegu Credit Information, and DBG Capital.

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DGB Financial Group (139130 KS)

Clarifying Market's Inaccurate Constituent Change Forecast in K200 Rebalancing with GICS Revision

This post clarifies the market's inaccurate constituent change forecast on the upcoming KOSPI 200 rebalancing in June with the GICS revision,...

Sanghyun Park

Additional Potential Inclusions in KOSPI 200 Rebalance in May 2023

The five stocks that are potential inclusions in KOSPI 200 rebalance in May 2023 include Kumyang, Cosmo Chemical, Dentium, Jeju Air, and Youlchon...

Douglas Kim

KOSPI 200: Special Changes & Rising Delinquency Ratios of Banks in Korea

Korea Exchange announced special changes in KOSPI 200. Effective 3 April, Meritz Securities will be excluded from the KOSPI 200 index and DGB...

Douglas Kim

KOSPI200 Ad Hoc Index Rebalance: DGB Financial (139130 KS) To Replace Meritz Sec (008560 KS)

DGB Financial will be added to the KOSPI200 Index on 31 March. The stock trades cheaper than its peers but becomes short sell eligible from the...

Brian Freitas

Shorting Kakao Pay on K200 Sector Index Passive Outflow Due to GICS Change on June 8

This post investigates the shorting opportunity for Kakao Pay on the potential passive outflow from KOSPI 200 sector index due to the GICS changes.

Sanghyun Park

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