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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<p>Last evening post market close, KRX announced the Fast Entry of <a href="https://www.smartkarma.com/entities/kakaobank-corp" target="_blank" data-smartkarma-citation="entities:33501:1" rel="noopener">KakaoBank (323410 KS)</a> and <a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960 KS)</a> 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> at the close of trading on 9 September.</p><p>As expected, <a href="https://www.smartkarma.com/entities/lock-lock-co-ltd" target="_blank" data-smartkarma-citation="entities:4739:1" rel="noopener">Lock&amp;Lock (115390 KS)</a> and <a href="https://www.smartkarma.com/entities/jw-pharmaceutical-corp" target="_blank" data-smartkarma-citation="entities:18784:1" rel="noopener">Jw Pharmaceutical (001060 KS)</a> will be deleted from the index.</p><p>Given the rapidly shrinking volumes in <a href="https://www.smartkarma.com/entities/kakaobank-corp" target="_blank" data-smartkarma-citation="entities:33501:1" rel="noopener">KakaoBank (323410 KS)</a> and <a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960 KS)</a>, the impact of passive buying will be larger than what the headline numbers indicate.</p><p>The deletions were expected, the stocks have sold off from their highs, some shorts have been built, and they will no longer be short sell eligible from 10 September. Expect the stocks to move lower and then for short covering to begin as borrow is recalled.</p><p>Local institutions have been big buyers on both inclusions since listing. If part of this buying is for their passive tracking baskets, there could be less buying from now to implementation and the stocks may trade weak closer to rebalance day.</p><p>With the <a href="https://www.smartkarma.com/entities/kakao-pay-corp" target="_blank" data-smartkarma-citation="entities:29675:1" rel="noopener">Kakao Pay (377300 KS)</a> IPO back on the table, investors could look to switch out of <a href="https://www.smartkarma.com/entities/kakaobank-corp" target="_blank" data-smartkarma-citation="entities:33501:1" rel="noopener">KakaoBank (323410 KS)</a> while the changing gaming rules and regulations in China could be a dampener for <a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960 KS)</a>.</p>

Last evening post market close, KRX announced the Fast Entry of KakaoBank (323410 KS) and  Krafton Inc (259960 KS) to the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the close of trading on 9 September.As expected, Lock&amp;Lock (115390 KS) and Jw Pharmaceutical (001060 KS) will be deleted from the index.Given the rapidly shrinking volumes in KakaoBank (323410 KS) and  Krafton Inc (259960 KS), the impact of passive buying will be larger than what the headline numbers indicate.The deletions were expected, the stocks have sold off from their highs, some shorts have been built, and they will no longer be short sell eligible from 10 September. Expect the stocks to move lower and then for short covering to begin as borrow is recalled.Local institutions have been big buyers on both inclusions since listing. If part of this buying is for their passive tracking baskets, there could be less buying from now to implementation and the stocks may trade weak closer to rebalance day.With the Kakao Pay (377300 KS) IPO back on the table, investors could look to switch out of KakaoBank (323410 KS) while the changing gaming rules and regulations in China could be a dampener for  Krafton Inc (259960 KS).

KOSPI200 September Index Rebalance: Krafton, Kakao Bank Fast Entry Confirmed

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.

Equity Capital Markets

<p>The following six major IPOs will debut in the Korean stock market in the second half of this year.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Major IPOs in Korea later this year"}'>Major IPOs in Korea later this year</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Tentative listing date"}'>Tentative listing date</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Target valuation"}'><div><div>Estimated target valuation</div></div></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Hyundai Heavy Industries"}'>Hyundai Heavy Industries</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"September"}'>September</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"₩4.5~5.3T"}'>₩4.5T~₩5.3T</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Kakao Pay"}'><strong>Kakao Pay</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"October"}'><strong>October</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"₩8.0~12.0T"}'><strong>₩7.0T~₩11.0T</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Simone Accessory"}'>Simone Accessory Collection</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"October"}'>October</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"₩2.0T"}'>₩2.0T</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Hyundai Engineering"}'>Hyundai Engineering</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"4th quarter"}'>4th quarter</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"₩7.0~9.0T"}'>₩8.0T~₩10.0T</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Netmarble Neo"}'>Netmarble Neo</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"4th quarter"}'>4th quarter</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"₩2.0T"}'>₩2.0T</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"LG Energy Solution"}'><strong>LG Energy Solution</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"4th quarter"}'><strong>4th quarter or next year</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"₩50.0~70.0T"}'><strong>₩50.0T~₩70.0T</strong></td>
</tr>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Source: Local news outlets"}'>Source: Local news outlets</td></tr>
</tbody>
</table><ul>
<li>First of all, <strong>Hyundai Heavy Industries</strong> will complete its listing by the end of September.</li>
<li>
<strong>Kakao Pay</strong> will submit a revised IPO prospectus next week and complete the listing process by October.</li>
<li>
<strong>Hyundai Engineering</strong>, in charge of plant and infrastructure at Hyundai Motor Group, is also expected to debut on the KOSPI around November. Hyundai Engineering's valuation is estimated at up to ₩10T.</li>
<li>In addition, <strong>Simone Accessory Collection</strong> and <strong>Netmarble Neo</strong> are also expected to make a debut on the KOSPI in the fourth quarter. They are each aiming for an IPO valuation of ₩2T.</li>
<li>However, <strong>LG Energy Solutions</strong>, originally scheduled to go public in October, is highly likely to delay the IPO schedule due to the GM recall incident this week.</li>
</ul>

The following six major IPOs will debut in the Korean stock market in the second half of this year.







Major IPOs in Korea later this year
Tentative listing date
Estimated target valuation


Hyundai Heavy Industries
September
₩4.5T~₩5.3T


Kakao Pay
October
₩7.0T~₩11.0T


Simone Accessory Collection
October
₩2.0T


Hyundai Engineering
4th quarter
₩8.0T~₩10.0T


Netmarble Neo
4th quarter
₩2.0T


LG Energy Solution
4th quarter or next year
₩50.0T~₩70.0T

Source: Local news outlets


First of all, Hyundai Heavy Industries will complete its listing by the end of September.

Kakao Pay will submit a revised IPO prospectus next week and complete the listing process by October.

Hyundai Engineering, in charge of plant and infrastructure at Hyundai Motor Group, is also expected to debut on the KOSPI around November. Hyundai Engineering's valuation is estimated at up to ₩10T.
In addition, Simone Accessory Collection and Netmarble Neo are also expected to make a debut on the KOSPI in the fourth quarter. They are each aiming for an IPO valuation of ₩2T.
However, LG Energy Solutions, originally scheduled to go public in October, is highly likely to delay the IPO schedule due to the GM recall incident this week.


Kakao Pay Listing Resumes Next Week, but LG Energy Solution IPO Delayed Possibly to Next Year

<p>With <a href="https://www.smartkarma.com/entities/kakaobank-corp" target="_blank" data-smartkarma-citation="entities:33501:1" rel="noopener">KakaoBank (323410 KS)</a> and <a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960 KS)</a> nearing the end of their first 15 days of trading, they are a certainty to be included in 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> at the September rebalance that coincides with the index futures expiry.</p><p>Post the changes at the June rebalance, we see <a href="https://www.smartkarma.com/entities/lock-lock-co-ltd" target="_blank" data-smartkarma-citation="entities:4739:1" rel="noopener">Lock&amp;Lock (115390 KS)</a> and <a href="https://www.smartkarma.com/entities/jw-pharmaceutical-corp" target="_blank" data-smartkarma-citation="entities:18784:1" rel="noopener">Jw Pharmaceutical (001060 KS)</a> as the lowest ranked constituents and the stocks could be deleted at the September rebalance.</p><p>We expect the announcement of the changes on 1 September and the implementation at the close of trading on 9 September.</p><p>The impact from passive trading is not very high on the inclusions while the impact on the potential deletions is a lot higher. There is a bit of short interest on the potential deletions and some of that could be covered in the lead up to index deletion.</p><p>The dynamics of the index changes are pretty interesting. <a href="https://www.smartkarma.com/entities/kakaobank-corp" target="_blank" data-smartkarma-citation="entities:33501:1" rel="noopener">KakaoBank (323410 KS)</a> and <a href="https://www.smartkarma.com/entities/krafton-inc" target="_blank" data-smartkarma-citation="entities:28956:1" rel="noopener"> Krafton Inc (259960 KS)</a> will be short-sell eligible from 10 September while the deletions will no longer be short-sell eligible. We suggest potential trading strategies to take advantage of these dynamics.</p>

With KakaoBank (323410 KS) and  Krafton Inc (259960 KS) nearing the end of their first 15 days of trading, they are a certainty to be included in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the September rebalance that coincides with the index futures expiry.Post the changes at the June rebalance, we see Lock&amp;Lock (115390 KS) and Jw Pharmaceutical (001060 KS) as the lowest ranked constituents and the stocks could be deleted at the September rebalance.We expect the announcement of the changes on 1 September and the implementation at the close of trading on 9 September.The impact from passive trading is not very high on the inclusions while the impact on the potential deletions is a lot higher. There is a bit of short interest on the potential deletions and some of that could be covered in the lead up to index deletion.The dynamics of the index changes are pretty interesting. KakaoBank (323410 KS) and  Krafton Inc (259960 KS) will be short-sell eligible from 10 September while the deletions will no longer be short-sell eligible. We suggest potential trading strategies to take advantage of these dynamics.

KOSPI200 September Rebalance Preview: Double Edged Sword

<h2>Block deals regulatory filing summary</h2><p>It turned out that Netmarble's next target was the remaining 0.34% of its unlocked Kakao Bank shares. The company put out a regulatory filing after the market closed yesterday.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/226/139/original/Screen+Shot+2021-08-25+at+6.09.44+PM.png?1629929669" class="editor-image img-responsive" data-smartkarma-image-id="226139"></figure></section><p><strong>Netmarble revealed that it had sold 1</strong><strong>,619,591 shares through block deals during the pre-market trading on August 25 for ₩133.1B, suggesting a deal price per share of ₩82,200.</strong> This represents a 3.75% discount to the close price on August 24 and an 8.46% discount to the close price on August 23.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Block deal details"}'>Block deal details</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Shares sold"}'>Number of shares sold</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1619591}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>1,619,591</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Total deal value"}'>Total deal value</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":133.1303802}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>₩133.1B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Deal price per share"}'><strong>Deal price per share</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":82199.99999999999}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}' data-sheets-formula="=R[-1]C[0]*1000000000/R[-2]C[0]"><strong>₩82,200</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Kakao Bank on August 24"}'><strong> - Discount to the price on August 24</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.03747072599531633}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(R[0]C[1]-R4C2)/R[0]C[1]"><strong>3.75%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Kakao Bank on August 23"}'><strong> - Discount to the price on August 23</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.08463251670378635}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(R[0]C[1]-R4C2)/R[0]C[1]"><strong>8.46%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Kakao Bank on August 20"}'> - Discount to the price on August 20</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.09670329670329686}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(R[0]C[1]-R4C2)/R[0]C[1]">9.67%</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: KRX KIND"}'>Source: KRX KIND</td></tr>
</tbody>
</table><p>The following is the number of Kakao Bank stock purchases by investor type on August 25. Netmarble's counterparties can be seen as foreign institutional investors in that there is only "Foreign" other than local retail that has purchased more than 1.6M on this day. Of course, this is by no means unusual.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/226/142/original/Screen+Shot+2021-08-25+at+6.30.30+PM.png?1629930722" class="editor-image img-responsive" data-smartkarma-image-id="226142"></figure></section>

Block deals regulatory filing summaryIt turned out that Netmarble's next target was the remaining 0.34% of its unlocked Kakao Bank shares. The company put out a regulatory filing after the market closed yesterday.Netmarble revealed that it had sold 1,619,591 shares through block deals during the pre-market trading on August 25 for ₩133.1B, suggesting a deal price per share of ₩82,200. This represents a 3.75% discount to the close price on August 24 and an 8.46% discount to the close price on August 23.





Block deal details

Number of shares sold
1,619,591


Total deal value
₩133.1B


Deal price per share
₩82,200


 - Discount to the price on August 24
3.75%


 - Discount to the price on August 23
8.46%


 - Discount to the price on August 20
9.67%

Source: KRX KIND

The following is the number of Kakao Bank stock purchases by investor type on August 25. Netmarble's counterparties can be seen as foreign institutional investors in that there is only "Foreign" other than local retail that has purchased more than 1.6M on this day. Of course, this is by no means unusual.

Netmarble Again Sold Kakao Bank: Real-World Float Change & Additional Stake Sale Possibility

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<p>In this insight, we review 27 of the largest IPOs in Korea in 2020 and 2021. We discuss the institutional investors demand ratio, lock-up ratios, market caps, IPO offering amounts, and share price performances in different time periods. We conclude that while we should continue to evaluate IPOs in Korea on a case-by-case basis, the overall bullish trend of IPOs has clearly been deteriorating in the past three months.</p><p>Among the 9 stocks that completed their IPOs in the past three months (June - August), their first day share price performance was an increase of 22% on average. In comparison, among the other 18 stocks that completed their IPOs from February 2020 to May 2021, their first day share price performance was an increase of 81.4% on average.</p><div class="content-highlight"><p><strong>Among the three major criteria mentioned in this report, the most important is the lock-up ratios, followed by market cap, and then the institutional investors demand. Prudent investors may want to use a combination of these methods to pick the best performing IPOs in Korea.  </strong></p></div>

In this insight, we review 27 of the largest IPOs in Korea in 2020 and 2021. We discuss the institutional investors demand ratio, lock-up ratios, market caps, IPO offering amounts, and share price performances in different time periods. We conclude that while we should continue to evaluate IPOs in Korea on a case-by-case basis, the overall bullish trend of IPOs has clearly been deteriorating in the past three months.Among the 9 stocks that completed their IPOs in the past three months (June - August), their first day share price performance was an increase of 22% on average. In comparison, among the other 18 stocks that completed their IPOs from February 2020 to May 2021, their first day share price performance was an increase of 81.4% on average.Among the three major criteria mentioned in this report, the most important is the lock-up ratios, followed by market cap, and then the institutional investors demand. Prudent investors may want to use a combination of these methods to pick the best performing IPOs in Korea.  

A Comprehensive Review of 27 IPOs in Korea in 2020 and 2021

South Korea

KakaoBank Corp. operates bank businesses. The Company provides deposit money, withdraw money, credit cards, stock accounts, linked loans, and other services. KakaoBank conducts businesses in South Korea.

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KakaoBank (323410 KS)

KOSPI200 September Index Rebalance: Krafton, Kakao Bank Fast Entry Confirmed

Krafton & KakaoBank will be added to the KOSPI200 index at the close on 9 Sep, replacing Lock&Lock and JW Pharma. The inclusions will be short sell...

Brian Freitas

Kakao Pay Listing Resumes Next Week, but LG Energy Solution IPO Delayed Possibly to Next Year

This post delivers the latest news on the listing schedule of Kakao Pay and LG Energy Solution and discusses potential impacts on their share prices.

Sanghyun Park

KOSPI200 September Rebalance Preview: Double Edged Sword

KakaoBank and Krafton are high probability inclusions to the KOSPI200 in September while Lock&Lock and JW Pharma are potential deletions. KakaoBank...

Brian Freitas

Netmarble Again Sold Kakao Bank: Real-World Float Change & Additional Stake Sale Possibility

This post details Netmarble's block deals involving its remaining unlocked shares of Kakao Bank. The post examines Kakao Bank's real-world float...

Sanghyun Park

A Comprehensive Review of 27 IPOs in Korea in 2020 and 2021

In this insight, we review 27 of the largest IPOs in Korea in 2020 and 2021. We discuss the institutional investors demand ratio, lock-up ratios,...

Douglas Kim

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52-week Range

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