Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<ul>
<li>We discuss potential inclusions and exclusions of the upcoming KOSPI 200 rebalance in May 2023. With regards to the upcoming KOSPI 200 rebalance, we like the following long-short trading strategy.</li>
<li>We would short a basket of potential exclusions from KOSPI 200 rebalance which would include the bottom 5% of KOSPI 200 index (10 stocks).</li>
<li>We would go long a basket of potential inclusions in KOSPI 200 rebalance which include four stocks including Dentium, Jeju Air, Samyang Foods, and DGB Financial. </li>
</ul>


We discuss potential inclusions and exclusions of the upcoming KOSPI 200 rebalance in May 2023. With regards to the upcoming KOSPI 200 rebalance, we like the following long-short trading strategy.
We would short a basket of potential exclusions from KOSPI 200 rebalance which would include the bottom 5% of KOSPI 200 index (10 stocks).
We would go long a basket of potential inclusions in KOSPI 200 rebalance which include four stocks including Dentium, Jeju Air, Samyang Foods, and DGB Financial. 


Potential Inclusions & Exclusions in KOSPI 200 Rebalance in May 2023

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>
<a href="https://www.smartkarma.com/entities/hyundai-dept-store-co" target="_blank" data-smartkarma-citation="entities:19098:1" rel="noopener">Hyundai Dept Store Co (069960 KS)</a>, <a href="https://www.smartkarma.com/entities/hyundai-greenfood-co-ltd" target="_blank" data-smartkarma-citation="entities:19560:1" rel="noopener">Hyundai Greenfood (005440 KS)</a> and <a href="https://www.smartkarma.com/entities/oci-co-ltd" target="_blank" data-smartkarma-citation="entities:1904:1" rel="noopener">Oci Co Ltd (010060 KS)</a> will spin-off divisions and list them prior to the next rebalance in June.</li>
<li>The equity spin-offs will result in passive flows prior to the trading suspension as well as on relisting of the stocks post the spin-off.</li>
<li>We expect one change to 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 April as one stock will be deleted due to low market cap following the spin-off.</li>
</ul>



Hyundai Dept Store Co (069960 KS), Hyundai Greenfood (005440 KS) and Oci Co Ltd (010060 KS) will spin-off divisions and list them prior to the next rebalance in June.
The equity spin-offs will result in passive flows prior to the trading suspension as well as on relisting of the stocks post the spin-off.
We expect one change to the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) in April as one stock will be deleted due to low market cap following the spin-off.


Korea Spin-Offs: Details and KOSPI200 Index Impact

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>From a trading perspective, we should pay attention to the KOSPI 200 corporate actions in Hyundai Department Group's demerger events, as both companies are KOSPI 200 constituents.</li>
<li>Hyundai Green Food's surviving company won't beat the cutoff, resulting in a KOSPI 200 constituent change on April 10. Samyang Foods will be a new addition.</li>
<li>Even the size of KOSPI 200 ETFs that will likely go into mechanical trading on April 10 will cause a significant price impact from a day trading perspective.</li>
</ul>


From a trading perspective, we should pay attention to the KOSPI 200 corporate actions in Hyundai Department Group's demerger events, as both companies are KOSPI 200 constituents.
Hyundai Green Food's surviving company won't beat the cutoff, resulting in a KOSPI 200 constituent change on April 10. Samyang Foods will be a new addition.
Even the size of KOSPI 200 ETFs that will likely go into mechanical trading on April 10 will cause a significant price impact from a day trading perspective.


KOSPI 200 Ad-Hoc Change: Hyundai Greenfood Out & Samyang Foods Fresh Buy-In on April 10

Equity Bottom-Up

<ul>
<li>Amid sharply rising interest rates and greater economic uncertainty, the subject of loan guarantees to affiliates among Korean companies has become more important. </li>
<li>In this insight, we discuss a pair trade between Shinsegae (long) and Hyundai Dept Store Co (short).</li>
<li>Four major reasons why we prefer Shinsegae vs Hyundai Dept Store include negative impact from equity spin-off, increasing leverage (including loan guarantees), valuations, and economies of scale. </li>
</ul>


Amid sharply rising interest rates and greater economic uncertainty, the subject of loan guarantees to affiliates among Korean companies has become more important. 
In this insight, we discuss a pair trade between Shinsegae (long) and Hyundai Dept Store Co (short).
Four major reasons why we prefer Shinsegae vs Hyundai Dept Store include negative impact from equity spin-off, increasing leverage (including loan guarantees), valuations, and economies of scale. 


Korea Loan Guarantees: A Pair Trade Between Shinsegae & Hyundai Dept Store

Index Rebalance

<ul>
<li>With the review period complete, we see 1 high probability change and 1 lower probability change for 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 December.</li>
<li>We estimate passive trackers will need to trade over 10 days of ADV on the high probability names. There are indications that there are pre-positions built on the stocks.</li>
<li>With short-sell eligibility flipping post implementation of the changes, a lot of pre-positions will be unwound prior to implementation and there will be trading opportunities on the reverse side.</li>
</ul>


With the review period complete, we see 1 high probability change and 1 lower probability change for the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) in December.
We estimate passive trackers will need to trade over 10 days of ADV on the high probability names. There are indications that there are pre-positions built on the stocks.
With short-sell eligibility flipping post implementation of the changes, a lot of pre-positions will be unwound prior to implementation and there will be trading opportunities on the reverse side.


KOSPI200 Index Rebalance Preview: Potential Changes, Excess Volumes & Pre-Positioning

South Korea

Hyundai Department Store Co., Ltd. operates department stores under the name of Hyundai Department over nationwide.  The Company also produces home shopping programs for cable channels and sells merchandise through home shopping programs.

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Hyundai Dept Store Co (069960 KS)

Potential Inclusions & Exclusions in KOSPI 200 Rebalance in May 2023

We discuss potential inclusions and exclusions of the upcoming KOSPI 200 rebalance in May 2023. We also discuss a long-short trading strategy...

Douglas Kim

Korea Spin-Offs: Details and KOSPI200 Index Impact

There are three KOSPI200 members that are doing an equity spin-off in the next few months. Two will re-enter the index while one will be deleted....

Brian Freitas

KOSPI 200 Ad-Hoc Change: Hyundai Greenfood Out & Samyang Foods Fresh Buy-In on April 10

This post investigates KOSPI 200 ad-hoc change possibility resulting from Hyundai Greenfood's failure to meet the cutoff, which will lead to the...

Sanghyun Park

Korea Loan Guarantees: A Pair Trade Between Shinsegae & Hyundai Dept Store

Four major reasons why we prefer Shinsegae vs Hyundai Dept Store include negative impact from equity spin-off, increasing leverage (including loan...

Douglas Kim

KOSPI200 Index Rebalance Preview: Potential Changes, Excess Volumes & Pre-Positioning

There could be 2 changes to the KOSPI200 in December. Passive trackers will need to trade over 10x ADV on a few stocks. Excess volume & short...

Brian Freitas

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