Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<ul>
<li>In a surprising move, Dongwon Industries announced that it will listen to the demands of the minority shareholders and change the merger ratio with Dongwon Enterprise.</li>
<li>This is likely to have a positive impact on Dongwon Industries since it boosts the value of Dongwon Industries' minority shareholders at the expense of controlling shareholders of Dongwon Enterprise.</li>
<li>The merger price of Dongwon Industries will be raised from 248,961 won to 384,140 won (reflecting net asset value). The merger ratio will be adjusted from 1:3.8385530 to 1:2.7023475.</li>
</ul>


In a surprising move, Dongwon Industries announced that it will listen to the demands of the minority shareholders and change the merger ratio with Dongwon Enterprise.
This is likely to have a positive impact on Dongwon Industries since it boosts the value of Dongwon Industries' minority shareholders at the expense of controlling shareholders of Dongwon Enterprise.
The merger price of Dongwon Industries will be raised from 248,961 won to 384,140 won (reflecting net asset value). The merger ratio will be adjusted from 1:3.8385530 to 1:2.7023475.


Dongwon Industries Listens to Minority Shareholders and Changes Merger Ratio with Dongwon Enterprise

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>Dongwon Industries merger will welcome 44.88M new shares, bumping up the total issued shares by 2.5 times.</li>
<li>So, we will likely see a passive inflow of 0.39x ADTV at the close on October 20, a level certainly worth our attention for flow trading.</li>
<li>However, a short position approach to betting on this possibility is expected to face quite a tight journey.</li>
</ul>


Dongwon Industries merger will welcome 44.88M new shares, bumping up the total issued shares by 2.5 times.
So, we will likely see a passive inflow of 0.39x ADTV at the close on October 20, a level certainly worth our attention for flow trading.
However, a short position approach to betting on this possibility is expected to face quite a tight journey.


Dongwon Industries Merger: KOSPI 200 Flow Trading & Shorting Prospects on Cancellation

<ul>
<li>Dongwon Industries (006040 KS) plans to merge with Dongwon Enterprise, paving the way for the latter company to complete a back door public listing.</li>
<li>We believe this merger between Dongwon Industries and Dongwon Enterprise will have a positive impact on Dongwon Industries.</li>
<li>Once the merger is completed, there could be less pressure "to keep the share price of Dongwon Industries intentionally low" in order have more beneficial merger ratio with Dongwon Enteprise. </li>
</ul>


Dongwon Industries (006040 KS) plans to merge with Dongwon Enterprise, paving the way for the latter company to complete a back door public listing.
We believe this merger between Dongwon Industries and Dongwon Enterprise will have a positive impact on Dongwon Industries.
Once the merger is completed, there could be less pressure "to keep the share price of Dongwon Industries intentionally low" in order have more beneficial merger ratio with Dongwon Enteprise. 


Merger of Dongwon Industries & Dongwon Enterprise

We now have KOSPI 200 and KOSDAQ 150 rebalancing completed. What does this mean? It means we have new members of the so-called Korea Short 350 as these new additions are now eligible for short selling.So, let's look at their current loan balance, often serving as a leading indicator of short-selling intensity in the short term.

We now have KOSPI 200 and KOSDAQ 150 rebalancing completed. What does this mean? It means we have new members of the so-called Korea Short 350 as these new additions are now eligible for short selling.So, let's look at their current loan balance, often serving as a leading indicator of short-selling intensity in the short term.

Korea Short 350 New Members: KOSPI 200 & KOSDAQ 150 Adds

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

Dongwon Industries Co., Ltd. is a deep-sea fishing company.  The Company produces and distributes fish can goods and processed seafood products including tuna sashimi.

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Dongwon Industries (006040 KS)

Dongwon Industries Listens to Minority Shareholders and Changes Merger Ratio with Dongwon Enterprise

In a surprising move, Dongwon Industries announced that it will listen to the demands of the minority shareholders and change the merger ratio with...

Douglas Kim

Dongwon Industries Merger: KOSPI 200 Flow Trading & Shorting Prospects on Cancellation

This post summarizes the Dongwon Industries merger deal and investigates the flow trading of the KOSPI 200 corporate event implementation. Also, it...

Sanghyun Park

Merger of Dongwon Industries & Dongwon Enterprise

Dongwon Industries plans to merge with Dongwon Enterprise, paving the way for the latter company to complete a backdoor public listing. This merger...

Douglas Kim

Korea Short 350 New Members: KOSPI 200 & KOSDAQ 150 Adds

We now have new members of the so-called Korea Short 350 for short-selling eligibility. They are new additions to KOSPI 200 and KOSDAQ 150. This...

Sanghyun Park

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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