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>A rather unusual price movement came out on February 20 for HLB. On the first trading day after the board of directors' decision, the price reached the upper daily limit.</li>
<li>The short covering got to a temporarily excessive level in the process of securing appraisal rights should be the reason that led to the upper limit.</li>
<li>We should design a trading setup targeting excessive short covering-triggered price overheating in split-off events. At this point, the most likely candidate to pursue a split-off is DB Hitek.</li>
</ul>


A rather unusual price movement came out on February 20 for HLB. On the first trading day after the board of directors' decision, the price reached the upper daily limit.
The short covering got to a temporarily excessive level in the process of securing appraisal rights should be the reason that led to the upper limit.
We should design a trading setup targeting excessive short covering-triggered price overheating in split-off events. At this point, the most likely candidate to pursue a split-off is DB Hitek.


Never-Seen Price Pattern Detected in a Split-Off Event Granting Appraisal Rights in Korea

<ul>
<li>This post will specifically examine arb trade opportunities during the subscription rights trading period, with the recent HLB and Lotte Chemical cases.</li>
<li>HLB gave an arb yield of 8%. As for Lotte Chemical, the size (₩1.1T) is much bigger, and it carries single-stock futures, a powerful incentive for arb traders.</li>
<li>Another thing for Lotte Chemical is that it is unclear whether the major shareholders will participate in the subscription, which can lead to a widening of our arb spread.</li>
</ul>


This post will specifically examine arb trade opportunities during the subscription rights trading period, with the recent HLB and Lotte Chemical cases.
HLB gave an arb yield of 8%. As for Lotte Chemical, the size (₩1.1T) is much bigger, and it carries single-stock futures, a powerful incentive for arb traders.
Another thing for Lotte Chemical is that it is unclear whether the major shareholders will participate in the subscription, which can lead to a widening of our arb spread.


A Guide to Arb Trade in Rights Offer: Feat. HLB & Lotte Chemical

<ul>
<li>The definitions of the terms used in this designation rule have not been clearly disclosed. Even the words used in the original Korean text make interpreting quite tricky.</li>
<li>What confuses investors the most is the Short Selling Proportion, basically the ratio of a stock's short-selling to the market.</li>
<li>Amount Increase in Short Selling Transactions is also quite confusing. It is the ratio of a stock's short selling to its 40-day average daily short selling volume.</li>
</ul>


The definitions of the terms used in this designation rule have not been clearly disclosed. Even the words used in the original Korean text make interpreting quite tricky.
What confuses investors the most is the Short Selling Proportion, basically the ratio of a stock's short-selling to the market.
Amount Increase in Short Selling Transactions is also quite confusing. It is the ratio of a stock's short selling to its 40-day average daily short selling volume.


Overheated Short Selling Designation in Korea: Precise Definitions for the Confusing Terms

<ul>
<li>KMW is the most important name in this rebalancing. It will be a newcomer to the K-New Deal, replacing AfreecaTV for Top Three in INTERNET.</li>
<li>KMW's inflow will be very substantial at 8.60x ADTV, whereas AfreecaTV will suffer an outflow equivalent to 1.69x ADTV.</li>
<li>In addition, HLB will replace Hanmi Science, and Seojin System will take over Danal. Webzen also replaces Devsisters.</li>
</ul>


KMW is the most important name in this rebalancing. It will be a newcomer to the K-New Deal, replacing AfreecaTV for Top Three in INTERNET.
KMW's inflow will be very substantial at 8.60x ADTV, whereas AfreecaTV will suffer an outflow equivalent to 1.69x ADTV.
In addition, HLB will replace Hanmi Science, and Seojin System will take over Danal. Webzen also replaces Devsisters.


KRX K-New Deal September Rebalancing: Screening Results

<ul>
<li>This offering is a 100% stockholder allocation with forfeited shares going to the public. There will be 9.56M new shares at a capital increase of nearly 9%.</li>
<li>We should note that the largest shareholder may again do the same trick. He may block-deal a 1% stake and use the proceeds to participate in this offering.</li>
<li>A massive release volume and a 25% discount rate may cause a severe pricing distortion, leading to arb trading openings.</li>
</ul>


This offering is a 100% stockholder allocation with forfeited shares going to the public. There will be 9.56M new shares at a capital increase of nearly 9%.
We should note that the largest shareholder may again do the same trick. He may block-deal a 1% stake and use the proceeds to participate in this offering.
A massive release volume and a 25% discount rate may cause a severe pricing distortion, leading to arb trading openings.


HLB Capital Increase: Offering Terms & Trading Dynamics

South Korea

HLB Inc. operates cord blood banking and clinical demonstration service. The Company also produces industrial valves, and iron manufacturing machines.  The Company's subsidiaries are engaged in a wide range of businesses including manufacturing of electric field instruments, lifeboats and agent services.

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HLB Inc (028300 KS)

Never-Seen Price Pattern Detected in a Split-Off Event Granting Appraisal Rights in Korea

This post tries to explain what led to HLB hitting the daily limit on Feb 20 and discusses trading implications for similar split-off events in the...

Sanghyun Park

A Guide to Arb Trade in Rights Offer: Feat. HLB & Lotte Chemical

This post guides the arb trade opportunities during the subscription rights trading period in a rights offer event in Korea by looking at the...

Sanghyun Park

Overheated Short Selling Designation in Korea: Precise Definitions for the Confusing Terms

This post aims to explain Korea's overheated short-selling designation rules and provide precise definitions for the confusing terms.

Sanghyun Park

KRX K-New Deal September Rebalancing: Screening Results

This post presents the screening results of the KRX K-New Deal rebalancing in September, as the screening period ended at the end of July.

Sanghyun Park

HLB Capital Increase: Offering Terms & Trading Dynamics

This post details HLB's rights offer announced in a regulatory filing last Friday and discusses the trading dynamics that will likely unfold.

Sanghyun Park

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