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

Kepco Plant Service & Engineering / Event-Driven

<ul>
<li>Nuclear power is a landmark policy that Korea's current administration heavily pushes. In response, the local market has quickly launched nuclear thematic ETFs: KINDEX &amp; HANARO, which got listed today.</li>
<li>Nuclear power is likely to become the next big thing, AUM-wise, similar to the secondary battery-themed ETFs under the former administration.</li>
<li>Since most of these nuclear stocks have significantly smaller market caps than those battery ones, the actual flow impact is likely to be more significant.</li>
</ul>


Nuclear power is a landmark policy that Korea's current administration heavily pushes. In response, the local market has quickly launched nuclear thematic ETFs: KINDEX &amp; HANARO, which got listed today.
Nuclear power is likely to become the next big thing, AUM-wise, similar to the secondary battery-themed ETFs under the former administration.
Since most of these nuclear stocks have significantly smaller market caps than those battery ones, the actual flow impact is likely to be more significant.


Two Nuclear ETFs Listed Today (KINDEX & HANARO): Passive Flow Outlook

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

<ul>
<li>Solactive has announced the constituent changes for the Global Uranium &amp; Nuclear Components Index. There are 8 adds and 1 delete with implementation at the close on 4 February.</li>
<li>Prior to the rebalance, <a href="https://www.smartkarma.com/entities/bhp-billiton-plc" target="_blank" data-smartkarma-citation="entities:21840:1" rel="noopener">BHP Billiton (BLT LN)</a> will be deleted at the close on 28 January following Unification with <a href="https://www.smartkarma.com/entities/bhp-group-ltd" target="_blank" data-smartkarma-citation="entities:147:1" rel="noopener">BHP Group (BHP AU)</a>.</li>
<li>The flows on the stocks are small, but there is a big impact on the inclusions in Australia. <a href="https://www.smartkarma.com/entities/global-x-uranium-etf" target="_blank" data-smartkarma-citation="entities:32107:1" rel="noopener">Global X Uranium ETF (URA US)</a> will buy around 5.5% of float.</li>
</ul>


Solactive has announced the constituent changes for the Global Uranium &amp; Nuclear Components Index. There are 8 adds and 1 delete with implementation at the close on 4 February.
Prior to the rebalance, BHP Billiton (BLT LN) will be deleted at the close on 28 January following Unification with BHP Group (BHP AU).
The flows on the stocks are small, but there is a big impact on the inclusions in Australia. Global X Uranium ETF (URA US) will buy around 5.5% of float.


Solactive Global Uranium & Nuclear Components Index Rebalance: Most Adds in Oz

<ul>
<li>The September KOSPI Size Index rebalancing could bring back the typical price impacts seen over the past decade, unlike the March rebalancing.</li>
<li>The previous rebalancing had anomalies due to newly listed stocks in LARGE and a stronger downward trend in LARGE-to-MID transitions, disrupting the expected price impact.</li>
<li>For September's rebalancing, fewer distortions are expected compared to March. The NPS Mid to Small Cap fund, a key influence, shows no significant changes in benchmark or AUM.</li>
</ul>


The September KOSPI Size Index rebalancing could bring back the typical price impacts seen over the past decade, unlike the March rebalancing.
The previous rebalancing had anomalies due to newly listed stocks in LARGE and a stronger downward trend in LARGE-to-MID transitions, disrupting the expected price impact.
For September's rebalancing, fewer distortions are expected compared to March. The NPS Mid to Small Cap fund, a key influence, shows no significant changes in benchmark or AUM.


Examining the September Reshuffle of the KOSPI Size Index Series

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>The review period for the September rebalance of the KOSPI Size Indices commenced on 1 June and will end on 31 August.</li>
<li>We see 8 migrations from MidCap to LargeCap, 1 new addition to LargeCap, 11 stocks moving from SmallCap to MidCap and 3 new additions to MidCap.</li>
<li>There are a few stocks that are expected to have passive flows from global and local index trackers over the next few months and that will add to the impact.</li>
</ul>


The review period for the September rebalance of the KOSPI Size Indices commenced on 1 June and will end on 31 August.
We see 8 migrations from MidCap to LargeCap, 1 new addition to LargeCap, 11 stocks moving from SmallCap to MidCap and 3 new additions to MidCap.
There are a few stocks that are expected to have passive flows from global and local index trackers over the next few months and that will add to the impact.


KOSPI Size Indices: Outperformance Slows on Momentum Stalls

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

GS Engineering & Construction / Equity Bottom-Up

<ul>
<li>We argue that the top 20 listed construction companies in Korea are likely to underperform KOSPI in 2024 mainly due to the excessive risks in the housing/commercial real estate sectors.</li>
<li>We expect the share prices of these 20 domestic construction companies to fall by at least 15%-20%+ on average in the next 6-12 months. </li>
<li>On 2 January 2024, Financial Supervisory Service (FSS) announced that there will be new reporting requirements for PF loans of Korean construction companies starting 2023 annual reports.</li>
</ul>


We argue that the top 20 listed construction companies in Korea are likely to underperform KOSPI in 2024 mainly due to the excessive risks in the housing/commercial real estate sectors.
We expect the share prices of these 20 domestic construction companies to fall by at least 15%-20%+ on average in the next 6-12 months. 
On 2 January 2024, Financial Supervisory Service (FSS) announced that there will be new reporting requirements for PF loans of Korean construction companies starting 2023 annual reports.


Top 20 Korean Construction Companies: Off-Balance Sheet Contingent Liabilities To Drive Lower Prices

South Korea

Hyundai Engineering & Construction Co., Ltd., a general construction company, provides civil engineering, architectural, industrial, and electrical engineering services.  The Company constructs roadways, dams, bridges, ports, industrial plants, apartment complexes, and cultural facilities.

Hyundai Engineering & Construction (000720 KS)

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Hyundai Engineering & Construction (000720 KS)

Two Nuclear ETFs Listed Today (KINDEX & HANARO): Passive Flow Outlook

This post details Korea's two local nuclear thematic ETFs, which made their market debut today. And it examines their passive flow outlook and the...

Sanghyun Park

Solactive Global Uranium & Nuclear Components Index Rebalance: Most Adds in Oz

There are 8 adds and 1 delete for the Solactive Global Uranium & Nuclear Components Index to be implemented at the close on 4 February. There isn't...

Brian Freitas

Examining the September Reshuffle of the KOSPI Size Index Series

This post examines the potential for flow trading setups targeting the September rebalancing of the KOSPI Size Index Series.

Sanghyun Park

KOSPI Size Indices: Outperformance Slows on Momentum Stalls

There could be 41 stocks migrating between size segments in September. The upward migrations have outperformed the downward migrations but the...

Brian Freitas

Top 20 Korean Construction Companies: Off-Balance Sheet Contingent Liabilities To Drive Lower Prices

Lotte Chemical (011170 KS)'s share price declined by 9.1% YTD. Lotte Chemical has a 44.02% stake in Lotte Construction whose PF loan balance as...

Douglas Kim

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