Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Douglas Research Advisory

Equity Bottom-Up

<ul>
<li>On 3 June, the shares of Korea Gas jumped limit up 30% to 38,700 won on huge volume (13.4 million), which was 37x higher than the previous day volume traded. </li>
<li>This was driven by the announcement of the South Korean President Yoon giving the approval to conduct exploratory drilling for potentially vast oil and gas prospects near Pohang. </li>
<li>The Korean government announced that there is a "very high" possibility the area contains as much as 14 billion barrels of oil and gas.</li>
</ul>


On 3 June, the shares of Korea Gas jumped limit up 30% to 38,700 won on huge volume (13.4 million), which was 37x higher than the previous day volume traded. 
This was driven by the announcement of the South Korean President Yoon giving the approval to conduct exploratory drilling for potentially vast oil and gas prospects near Pohang. 
The Korean government announced that there is a "very high" possibility the area contains as much as 14 billion barrels of oil and gas.


<ul>
<li>It was reported today in numerous local media that there will be an inclusion of 'shareholder value improvement' management evaluation criteria for listed government enterprises.</li>
<li>Some of these listed government enterprises rallied strongly today (KEPCO - up 10%; KOGAS - up 12.7%; Korea District Heating - Up 30%). </li>
<li>The detailed evaluation criteria for management evaluation of government enterprises will include the appropriateness of dividend levels, protection of minority shareholders, and compliance with best practices for ESG improvement.</li>
</ul>


It was reported today in numerous local media that there will be an inclusion of 'shareholder value improvement' management evaluation criteria for listed government enterprises.
Some of these listed government enterprises rallied strongly today (KEPCO - up 10%; KOGAS - up 12.7%; Korea District Heating - Up 30%). 
The detailed evaluation criteria for management evaluation of government enterprises will include the appropriateness of dividend levels, protection of minority shareholders, and compliance with best practices for ESG improvement.


Inclusion of 'Shareholder Value Improvement' Mgmt Evaluation Reforms for Listed Govt Enterprises

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

Event-Driven

<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

Cross Asset Strategy

<ul>
<li>FSC Chairman Kim Joo-hyun mentioned that too many companies in Korea are trading below book value and the FSC plans to implement changes to improve upon this issue. </li>
<li>According to Korea Exchange, 1,111 companies out of total listed in KOSPI and KOSDAQ in Korea (2,538) are trading at below 1x book value (PBR) (liquidation value). </li>
<li>According to the Capital Group, about 39% of companies in the TOPIX trade below book value, compared to just 5% for companies in the S&amp;P 500 Index. </li>
</ul>


FSC Chairman Kim Joo-hyun mentioned that too many companies in Korea are trading below book value and the FSC plans to implement changes to improve upon this issue. 
According to Korea Exchange, 1,111 companies out of total listed in KOSPI and KOSDAQ in Korea (2,538) are trading at below 1x book value (PBR) (liquidation value). 
According to the Capital Group, about 39% of companies in the TOPIX trade below book value, compared to just 5% for companies in the S&amp;P 500 Index. 


44% of Korean Stocks Are Trading Below Book Value - FSC Wants to Improve This (Following Japan)

<ul>
<li>The review period for the September rebalance of the KOSPI Size Indices started 1 June and will end 31 August. The changes will be implemented at the close 7 September.</li>
<li>We see 7 migrations from MidCap to LargeCap, 6 migrations from LargeCap to MidCap, 7 new adds to MidCap, and 17 migrations from SmallCap to MidCap.</li>
<li>Historically, stocks migrating from SmallCap to MidCap have outperformed stocks that are migrating between other categories.</li>
</ul>


The review period for the September rebalance of the KOSPI Size Indices started 1 June and will end 31 August. The changes will be implemented at the close 7 September.
We see 7 migrations from MidCap to LargeCap, 6 migrations from LargeCap to MidCap, 7 new adds to MidCap, and 17 migrations from SmallCap to MidCap.
Historically, stocks migrating from SmallCap to MidCap have outperformed stocks that are migrating between other categories.


KOSPI Size Indices - Plenty of Migrations to Attract Active Flows

South Korea

Korea Gas Corporation manufactures, wholesales, and distributes liquefied natural gas (LNG) and liquefied petroleum gas (LPG) throughout South Korea. The Company also constructs and operates LNG receiving terminals and supplying networks for domestic distribution.  Korea Gas invests in LNG suppliers in Oman and Qatar.

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Korea Gas (036460 KS)

Korea Gas Corp: Drill Baby Drill

KOGAS shares jumped 30% driven by the announcement of the South Korean President Yoon giving the approval to conduct exploratory drilling for...

Douglas Kim

Inclusion of 'Shareholder Value Improvement' Mgmt Evaluation Reforms for Listed Govt Enterprises

It was reported today in numerous local media that there will be an inclusion of 'shareholder value improvement' management evaluation criteria for...

Douglas Kim

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

44% of Korean Stocks Are Trading Below Book Value - FSC Wants to Improve This (Following Japan)

A 44% of Korean stocks are trading below book value. FSC wants to improve this, following Japan's "name and shame" policy.

Douglas Kim

KOSPI Size Indices - Plenty of Migrations to Attract Active Flows

We currently forecast 53 migrations for the KOSPI Size Indices. There are stocks that are potential KOSPI200 adds in December and others that will...

Brian Freitas

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