Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

The Korea Exchange (KRX) will announce the results of the June 2021 review of 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> in May with the changes becoming effective after the close of trading on 10 June.We currently see <a href="https://www.smartkarma.com/entities/taihan-electric-wire-co-ltd" target="_blank" data-smartkarma-citation="entities:11551:1" rel="noopener">Taihan Electric Wire (001440 KS)</a>, <a href="https://www.smartkarma.com/entities/dongwon-industries-co-ltd" target="_blank" data-smartkarma-citation="entities:1783:1" rel="noopener">Dongwon Industries (006040 KS)</a>, <a href="https://www.smartkarma.com/entities/hyosung-advanced-materials-c" target="_blank" data-smartkarma-citation="entities:27751:1" rel="noopener">Hyosung Advanced Materials C (298050 KS)</a> and <a href="https://www.smartkarma.com/entities/hyosung-tnc-co-ltd" target="_blank" data-smartkarma-citation="entities:27749:1" rel="noopener">Hyosung TNC Co Ltd (298020 KS)</a> as potential inclusions in the index, with <a href="https://www.smartkarma.com/entities/taeyoung-engineering-construction-co-ltd" target="_blank" data-smartkarma-citation="entities:18740:1" rel="noopener">Taeyoung Engineering &amp; Construction (009410 KS)</a>, <a href="https://www.smartkarma.com/entities/namsun-aluminum-co-ltd" target="_blank" data-smartkarma-citation="entities:17514:1" rel="noopener">Namsun Aluminum (008350 KS)</a>, <a href="https://www.smartkarma.com/entities/hanil-hyundai-cement-co-ltd" target="_blank" data-smartkarma-citation="entities:14406:1" rel="noopener">Hanil Hyundai Cement (006390 KS)</a> and <a href="https://www.smartkarma.com/entities/binggrae-co-ltd" target="_blank" data-smartkarma-citation="entities:16424:1" rel="noopener">Binggrae Co Ltd (005180 KS)</a> as the corresponding exclusions.<a href="https://www.smartkarma.com/entities/sk-bioscience-co-ltd" target="_blank" data-smartkarma-citation="entities:31484:1" rel="noopener">SK Bioscience (302440 KS)</a> is expected to list on the <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-index" target="_blank" data-smartkarma-citation="entities:22911:1" rel="noopener">Korea Stock Exchange Kospi Index (KOSPI INDEX)</a> market in March and there is a possibility that the stock gets Fast Entry into the index. That could see <a href="https://www.smartkarma.com/entities/sebang-global-battery-co-ltd" target="_blank" data-smartkarma-citation="entities:9618:1" rel="noopener">Sebang Global Battery (004490 KS)</a> being deleted from the index.<a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (1486402D KS)</a> is another possible Fast Entry into the index though there are few details available on when the stock is expected to list.The short sell ban in Korea has been extended to 2 May. Stocks that are constituents of 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> and <a href="https://www.smartkarma.com/entities/kosdaq-150-index" target="_blank" data-smartkarma-citation="entities:31077:1" rel="noopener">KOSDAQ 150 Index (KOSDQ150 INDEX)</a> can be short sold from 3 May. The commencement of short selling on these stocks prior to the announcement of the June review changes could result in the expected inclusions outperforming the expected exclusions and opening up other interesting trading strategies.

The Korea Exchange (KRX) will announce the results of the June 2021 review of the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) in May with the changes becoming effective after the close of trading on 10 June.We currently see Taihan Electric Wire (001440 KS), Dongwon Industries (006040 KS), Hyosung Advanced Materials C (298050 KS) and Hyosung TNC Co Ltd (298020 KS) as potential inclusions in the index, with Taeyoung Engineering &amp; Construction (009410 KS), Namsun Aluminum (008350 KS), Hanil Hyundai Cement (006390 KS) and Binggrae Co Ltd (005180 KS) as the corresponding exclusions.SK Bioscience (302440 KS) is expected to list on the Korea Stock Exchange Kospi Index (KOSPI INDEX) market in March and there is a possibility that the stock gets Fast Entry into the index. That could see Sebang Global Battery (004490 KS) being deleted from the index. Krafton Inc (1486402D KS) is another possible Fast Entry into the index though there are few details available on when the stock is expected to list.The short sell ban in Korea has been extended to 2 May. Stocks that are constituents of the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) and KOSDAQ 150 Index (KOSDQ150 INDEX) can be short sold from 3 May. The commencement of short selling on these stocks prior to the announcement of the June review changes could result in the expected inclusions outperforming the expected exclusions and opening up other interesting trading strategies.

KOSPI200 Index Rebalance Preview: Increasing Number of Potential Changes

The Korea Exchange (KRX) will announce the results of the June 2021 review of 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> in May with the changes becoming effective after the close of trading on 10 June.Currently, we see <a href="https://www.smartkarma.com/entities/taihan-electric-wire-co-ltd" target="_blank" data-smartkarma-citation="entities:11551:1" rel="noopener">Taihan Electric Wire (001440 KS)</a> being included in the index and <a href="https://www.smartkarma.com/entities/taeyoung-engineering-construction-co-ltd" target="_blank" data-smartkarma-citation="entities:18740:1" rel="noopener">Taeyoung Engineering &amp; Construction (009410 KS)</a> being deleted, with a few stocks as close adds/ deletes. <a href="https://www.smartkarma.com/entities/taeyoung-engineering-construction-co-ltd" target="_blank" data-smartkarma-citation="entities:18740:1" rel="noopener">Taeyoung Engineering &amp; Construction (009410 KS)</a>'s expected deletion is a result of the demerger of TY Holdings (363280 KS) in September which has significantly lowered its market cap.<a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener">Krafton Inc (1486402D KS)</a>'s estimated market cap of US$26-30bn would see it included in the index as a Fast Entry if it lists before the end of April which would put <a href="https://www.smartkarma.com/entities/sebang-global-battery-co-ltd" target="_blank" data-smartkarma-citation="entities:9618:1" rel="noopener">Sebang Global Battery (004490 KS)</a> at risk of deletion. If Krafton lists by end January/ beginning February (seems unlikely at this point in time), it could be included in the KOSPI 200 in March. If it lists after mid Feb but before end April, Krafton could be included in the index at the June review.<a href="https://www.smartkarma.com/entities/taihan-electric-wire-co-ltd" target="_blank" data-smartkarma-citation="entities:11551:1" rel="noopener">Taihan Electric Wire (001440 KS)</a> has increased in price sharply over the last month and we would wait for the price to stabilize a bit before buying into the stock.

The Korea Exchange (KRX) will announce the results of the June 2021 review of the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) in May with the changes becoming effective after the close of trading on 10 June.Currently, we see Taihan Electric Wire (001440 KS) being included in the index and Taeyoung Engineering &amp; Construction (009410 KS) being deleted, with a few stocks as close adds/ deletes. Taeyoung Engineering &amp; Construction (009410 KS)'s expected deletion is a result of the demerger of TY Holdings (363280 KS) in September which has significantly lowered its market cap.Krafton Inc (1486402D KS)'s estimated market cap of US$26-30bn would see it included in the index as a Fast Entry if it lists before the end of April which would put Sebang Global Battery (004490 KS) at risk of deletion. If Krafton lists by end January/ beginning February (seems unlikely at this point in time), it could be included in the KOSPI 200 in March. If it lists after mid Feb but before end April, Krafton could be included in the index at the June review.Taihan Electric Wire (001440 KS) has increased in price sharply over the last month and we would wait for the price to stabilize a bit before buying into the stock.

KOSPI200 Index Rebalance Preview: IPO Fast Entry & End of Short Sell Ban Will Shake Things Up

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Thematic (Sector/Industry)

The top 10 events impacting the Korean stock market, economy, &amp; politics in March were as follows:<ul>
<li>SEMICONDUCTOR SECTOR WARNINGS</li>
<li>KOREAN AIR &amp; ASIANA AIR CHAIRMEN ARE THROWN OUT/QUIT</li>
<li>HYUNDAI AUTOEVER IPO</li>
<li>KOREAN COMPANIES SHUTTING DOWN &amp; RESTRUCTURING OPERATIONS IN CHINA</li>
<li>NEXON M&amp;A</li>
<li>KOSPI 200 &amp; KOSDAQ 150 REBALANCING</li>
<li>CONSERVATIVES VS. LIBERALS POPULARITY IN KOREA</li>
<li>FINE DUST PROBLEM</li>
<li>CLOSING OUT THE HYOSUNG TNC/HYOSUNG CORP PAIR TRADE</li>
<li>BURNING SUN</li>
</ul><hr>The top three reports we wrote in March related to the Korean market were as follows (in terms of views &amp; appreciates): <ul>
<li><a href="https://www.smartkarma.com/insights/nexon-valuation-analysis" target="_blank" data-smartkarma-citation="insights:28306">Nexon Valuation Analysis</a></li>
<li><a href="https://www.smartkarma.com/insights/a-list-of-major-korean-companies-shutting-down-or-restructuring-their-operations-in-china" target="_blank" data-smartkarma-citation="insights:28745">A List of Major Korean Companies Shutting Down or Restructuring Their Operations in China</a></li>
<li><a href="https://www.smartkarma.com/insights/hyundai-autoever-ipo-valuation-analysis" target="_blank" data-smartkarma-citation="insights:28398">Hyundai Autoever IPO Valuation Analysis</a></li>
</ul>Our model portfolio was up 0.3% in March (cash is 35% of model portfolio), outperforming KOSPI which was down 2.5% in March. Our model portfolio is equal-weighted at the beginning of each month. The top performing stocks in our model portfolio in March included <a href="https://www.smartkarma.com/entities/15983" target="_blank" data-smartkarma-citation="entities:15983:1">F&amp;F Co Ltd (007700 KS)</a>, <a href="https://www.smartkarma.com/entities/14122" target="_blank" data-smartkarma-citation="entities:14122:1">Nongshim Co Ltd (004370 KS)</a>, and <a href="https://www.smartkarma.com/entities/5169" target="_blank" data-smartkarma-citation="entities:5169:1">NCsoft Corp (036570 KS)</a>.

The top 10 events impacting the Korean stock market, economy, &amp; politics in March were as follows:
SEMICONDUCTOR SECTOR WARNINGS
KOREAN AIR &amp; ASIANA AIR CHAIRMEN ARE THROWN OUT/QUIT
HYUNDAI AUTOEVER IPO
KOREAN COMPANIES SHUTTING DOWN &amp; RESTRUCTURING OPERATIONS IN CHINA
NEXON M&amp;A
KOSPI 200 &amp; KOSDAQ 150 REBALANCING
CONSERVATIVES VS. LIBERALS POPULARITY IN KOREA
FINE DUST PROBLEM
CLOSING OUT THE HYOSUNG TNC/HYOSUNG CORP PAIR TRADE
BURNING SUN
The top three reports we wrote in March related to the Korean market were as follows (in terms of views &amp; appreciates): 
Nexon Valuation Analysis
A List of Major Korean Companies Shutting Down or Restructuring Their Operations in China
Hyundai Autoever IPO Valuation Analysis
Our model portfolio was up 0.3% in March (cash is 35% of model portfolio), outperforming KOSPI which was down 2.5% in March. Our model portfolio is equal-weighted at the beginning of each month. The top performing stocks in our model portfolio in March included F&amp;F Co Ltd (007700 KS), Nongshim Co Ltd (004370 KS), and NCsoft Corp (036570 KS). 

Korea Stock Market Monthly Recap #34 (March 2019)

On March 12th, 2019, we wrote a report on initiating a pair trade of going long <a href="https://www.smartkarma.com/entities/27749" target="_blank" data-smartkarma-citation="entities:27749:1">Hyosung TNC Co Ltd (298020 KS)</a> and going short <a href="https://www.smartkarma.com/entities/20712" target="_blank" data-smartkarma-citation="entities:20712:1">Hyosung Corporation (004800 KS)</a>. (<a href="https://www.smartkarma.com/insights/korean-stubs-spotlight-a-pair-trade-between-hyosung-corp-and-hyosung-tnc" target="_blank" data-smartkarma-citation="insights:28455">Korean Stubs Spotlight: A Pair Trade Between Hyosung Corp and Hyosung TNC</a>).  This trade has worked out well and now we think this is a good time to close this trade.The return on this pair trade was 8.2%. (This assumes no commission costs, pricing spreads, taxes, or borrowing cost) using closing share price as of March 12th to March 21st, 2019. This trade was made over a period of 9 days so the annualized returns would be 332%. We believe that Hyosung TNC is up so much in the past 9 days mainly because it appears that a few investors saw this stock as an undervalued stock that was being ignored by the market. In our report, <a href="https://www.smartkarma.com/insights/korean-stubs-spotlight-a-pair-trade-between-hyosung-corp-and-hyosung-tnc" target="_blank" data-smartkarma-citation="insights:28455">Korean Stubs Spotlight: A Pair Trade Between Hyosung Corp and Hyosung TNC</a>,  we mentioned that Hyosung TNC appears to be a turnaround story driven by the following four key factors: <ul>
<li>Decline in raw material prices </li>
<li>Aggressive spandex investment in India </li>
<li>Stabilization of spandex prices in 2H19 </li>
<li>Consolidation of the global spandex industry</li>
</ul>

On March 12th, 2019, we wrote a report on initiating a pair trade of going long Hyosung TNC Co Ltd (298020 KS) and going short Hyosung Corporation (004800 KS). (Korean Stubs Spotlight: A Pair Trade Between Hyosung Corp and Hyosung TNC).  This trade has worked out well and now we think this is a good time to close this trade.The return on this pair trade was 8.2%. (This assumes no commission costs, pricing spreads, taxes, or borrowing cost) using closing share price as of March 12th to March 21st, 2019. This trade was made over a period of 9 days so the annualized returns would be 332%. We believe that Hyosung TNC is up so much in the past 9 days mainly because it appears that a few investors saw this stock as an undervalued stock that was being ignored by the market. In our report, Korean Stubs Spotlight: A Pair Trade Between Hyosung Corp and Hyosung TNC,  we mentioned that Hyosung TNC appears to be a turnaround story driven by the following four key factors: 
Decline in raw material prices 
Aggressive spandex investment in India 
Stabilization of spandex prices in 2H19 
Consolidation of the global spandex industry


Korean Stubs Spotlight: Close Out the Pair Trade Between Hyosung TNC & Hyosung Corp

In this report, we provide an analysis of our pair trade idea between <a href="https://www.smartkarma.com/entities/20712" target="_blank" data-smartkarma-citation="entities:20712:1">Hyosung Corporation (004800 KS)</a> (market cap of 1,612 billion won) and <a href="https://www.smartkarma.com/entities/27749" target="_blank" data-smartkarma-citation="entities:27749:1">Hyosung TNC Co Ltd (298020 KS)</a> (market cap of 712 billion won). Our strategy will be to be long Hyosung TNC and be short Hyosung Corp. In the past six months, Hyosung Corp is up 62% while Hyosung TNC is down 12%. We believe this price divergence has been excessive. The four major reasons why Hyosung Corp's share price has surged in the past six months are mentioned below. There is a case to be made that the market has already factored into Hyosung Corp's share price many of the positive factors mentioned below. <ul>
<li>Excellent dividends </li>
<li>Corporate activism related stock </li>
<li>Strong financial results </li>
<li>Timing of the increased insider ownerships/Completion of tender offers</li>
</ul>Hyosung TNC has underperformed the market as well as Hyosung Corp in the past six months. However, Hyosung TNC appears to be a turnaround story driven by the following factors: <ul>
<li>Decline in raw material prices </li>
<li>Aggressive spandex investment in India </li>
<li>Stabilization of spandex prices in 2H19 </li>
<li>Consolidation of the global spandex industry</li>
</ul>

In this report, we provide an analysis of our pair trade idea between Hyosung Corporation (004800 KS) (market cap of 1,612 billion won) and Hyosung TNC Co Ltd (298020 KS) (market cap of 712 billion won). Our strategy will be to be long Hyosung TNC and be short Hyosung Corp. In the past six months, Hyosung Corp is up 62% while Hyosung TNC is down 12%. We believe this price divergence has been excessive. The four major reasons why Hyosung Corp's share price has surged in the past six months are mentioned below. There is a case to be made that the market has already factored into Hyosung Corp's share price many of the positive factors mentioned below. 
Excellent dividends 
Corporate activism related stock 
Strong financial results 
Timing of the increased insider ownerships/Completion of tender offers
Hyosung TNC has underperformed the market as well as Hyosung Corp in the past six months. However, Hyosung TNC appears to be a turnaround story driven by the following factors: 
Decline in raw material prices 
Aggressive spandex investment in India 
Stabilization of spandex prices in 2H19 
Consolidation of the global spandex industry


Korean Stubs Spotlight: A Pair Trade Between Hyosung Corp and Hyosung TNC

South Korea

Hyosung TNC Co. Ltd. manufactures and distributes fiber products. The Company produces nylon, polyester yarns, fabrics, and other related products. Hyosung TNC also trades steel and chemicals.

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Hyosung TNC Co Ltd (298020 KS)

KOSPI200 Index Rebalance Preview: Increasing Number of Potential Changes

We see 4 potential changes to the KOSPI200 index at the June review (up from 1 change in Nov). With the short sell ban expiring on 2 May for...

Brian Freitas

KOSPI200 Index Rebalance Preview: IPO Fast Entry & End of Short Sell Ban Will Shake Things Up

We just just one addition and deletion to the KOSPI200 index in the June 2021 review. The end of the short sell ban in March will bring a lot more...

Brian Freitas

Korea Stock Market Monthly Recap #34 (March 2019)

The top 10 events impacting the Korean stock market, economy, & politics in March were as follows: SEMICONDUCTOR SECTOR WARNINGS KOREAN AIR...

Douglas Kim

Korean Stubs Spotlight: Close Out the Pair Trade Between Hyosung TNC & Hyosung Corp

On March 12th, 2019, we wrote a report on initiating a pair trade of going long Hyosung TNC Co Ltd (298020 KS) and going short Hyosung Corporation...

Douglas Kim

Korean Stubs Spotlight: A Pair Trade Between Hyosung Corp and Hyosung TNC

In this report, we provide an analysis of our pair trade idea between Hyosung Corporation (004800 KS) (market cap of 1,612 billion won) and Hyosung...

Douglas Kim

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