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

Korea Stock Exchange KOSPI 200 / Event-Driven

<ul>
<li>This final guideline formalizes earlier drafts by the FSS. Though not strictly mandatory, its detailed requirements mean it functions as a de facto rule that must be followed closely.</li>
<li>The new, stringent requirements are likely to eliminate common stock borrowing practices in Korea, making timely transactions difficult.</li>
<li>New trading patterns and market flows may emerge when short selling resumes in April, with increased importance of borrow balance data and potential rise in counter-flow trading.</li>
</ul>


This final guideline formalizes earlier drafts by the FSS. Though not strictly mandatory, its detailed requirements mean it functions as a de facto rule that must be followed closely.
The new, stringent requirements are likely to eliminate common stock borrowing practices in Korea, making timely transactions difficult.
New trading patterns and market flows may emerge when short selling resumes in April, with increased importance of borrow balance data and potential rise in counter-flow trading.


Korea FSS Releases Final Guidelines for Short Selling Compliance: Trading Implications

<ul>
<li>The Feb 26th announcement introduces the Corporate Value Up Program and unveils the Korea Premium Index direction. Methodology finalization expected by mid-March; ETFs launch by mid-May.</li>
<li>Similar to JPX Prime 150, KRX aims to target enhancing equity spread and PBR trends (+1.0x) while also integrating dividend growth rate. KOSDAQ stocks may be omitted.</li>
<li>NPS's role is vital for the Korea Premium Index, yet aligning its passive strategy with this index faces challenges. Ongoing discussions aim to adjust regulations for this index investment.</li>
</ul>


The Feb 26th announcement introduces the Corporate Value Up Program and unveils the Korea Premium Index direction. Methodology finalization expected by mid-March; ETFs launch by mid-May.
Similar to JPX Prime 150, KRX aims to target enhancing equity spread and PBR trends (+1.0x) while also integrating dividend growth rate. KOSDAQ stocks may be omitted.
NPS's role is vital for the Korea Premium Index, yet aligning its passive strategy with this index faces challenges. Ongoing discussions aim to adjust regulations for this index investment.


What We've Gathered Thus Far Regarding KOREA PREMIUM INDEX: Schedule, Methodology, & NPS

Equity Derivatives and Volatility Specialist, Clifton Derivatives

John Ley

Equity Derivatives and Volatility Specialist

Clifton Derivatives

Independent derivative and volatility research firm focusing on events/catalysts, earnings, relative value and cross asset volatility strategies.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899" rel="noopener">Hang Seng Index (HSI INDEX)</a>, <a href="https://www.smartkarma.com/entities/shanghai-shenzhen-csi-300-index" target="_blank" data-smartkarma-citation="entities:22906" rel="noopener">Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX EQUITY)</a> and <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909" rel="noopener">Nikkei 225 (NKY INDEX)</a> all have elevated implied vols vs their peers and vs historical observations for October.</li>
<li>
<a href="https://www.smartkarma.com/entities/nifty-index" target="_blank" data-smartkarma-citation="entities:23617" rel="noopener">NIFTY Index (NIFTY INDEX)</a> , <a href="https://www.smartkarma.com/entities/s-p-500-index" target="_blank" data-smartkarma-citation="entities:22886" rel="noopener">S&amp;P 500 INDEX (SPX INDEX)</a> and <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a>  implied vols are on the low end of what is typically realized in October.</li>
<li>Most markets see price weakness in the 3rd week of the month with realized volatility underperforming over the back half of the month.</li>
</ul>



Hang Seng Index (HSI INDEX), Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX EQUITY) and Nikkei 225 (NKY INDEX) all have elevated implied vols vs their peers and vs historical observations for October.

NIFTY Index (NIFTY INDEX) , S&amp;P 500 INDEX (SPX INDEX) and S&amp;P/ASX 200 (AS51 INDEX)  implied vols are on the low end of what is typically realized in October.
Most markets see price weakness in the 3rd week of the month with realized volatility underperforming over the back half of the month.


EQD | Asia Monthly Vol Roadmap: Elevated IV's in CSI300 and Hang Seng Present Tactical Opportunity

<ul>
<li>Nine companies disclosed value-up plans, with four official and five pending disclosures. Initially, these announcements boosted stock prices, but long-term correlations were inconclusive. Yet, shareholder returns notably rose in H1.</li>
<li>NPS increased stakes in three of the nine recently announced value-up companies. They share traits in value-up trading (large caps &amp; low PBR), potentially guiding our strategy as NPS enters.</li>
<li>BlackRock's Hong Kong branch has recently engaged with six Korean asset management firms for potential entrustment of its Asian fund's Korean investment portion, focusing on the value-up policy.</li>
</ul>


Nine companies disclosed value-up plans, with four official and five pending disclosures. Initially, these announcements boosted stock prices, but long-term correlations were inconclusive. Yet, shareholder returns notably rose in H1.
NPS increased stakes in three of the nine recently announced value-up companies. They share traits in value-up trading (large caps &amp; low PBR), potentially guiding our strategy as NPS enters.
BlackRock's Hong Kong branch has recently engaged with six Korean asset management firms for potential entrustment of its Asian fund's Korean investment portion, focusing on the value-up policy.


Recently Observed Market Flow Movements Related to Korea's Value-Up Initiatives

Quantitative Researcher, MRM Research

Nico Rosti

Quantitative Researcher

MRM Research

Quantitative Research

<ul>
<li>The <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">KOSPI 200 INDEX</a> started a modest pullback and is entering a BUY area, but it could fall further this coming week, caution is advised.</li>
<li>The support levels to buy are between 383-371, this coming week.</li>
<li>Alternatively buy the Close, if the WEEKLY Close is negative, next Friday.</li>
</ul>


The KOSPI 200 INDEX started a modest pullback and is entering a BUY area, but it could fall further this coming week, caution is advised.
The support levels to buy are between 383-371, this coming week.
Alternatively buy the Close, if the WEEKLY Close is negative, next Friday.


EQD | KOSPI 200 Sell-Off Could Accelerate This Week, But It's A BUY

South Korea

The KOSPI 200 Index is a capitalization-weighted index of 200 Korean stocks which make up 93% of the total market value of the Korea Stock Exchange. The index was developed with a base value of 100 as of January 3, 1990.

Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX EQUITY)

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX EQUITY)

Korea FSS Releases Final Guidelines for Short Selling Compliance: Trading Implications

This morning, the Korea FSS released the final version of its short selling compliance guidelines. This post explores the guidelines and their...

Sanghyun Park

What We've Gathered Thus Far Regarding KOREA PREMIUM INDEX: Schedule, Methodology, & NPS

This post summarizes what the market has gathered thus far regarding the KOREA PREMIUM INDEX: schedule, methodology, and NPS participation.

Sanghyun Park

EQD | Asia Monthly Vol Roadmap: Elevated IV's in CSI300 and Hang Seng Present Tactical Opportunity

Implied volatility levels across key Asian indices present several tactical opportunities this month for outright or pairs trades...

John Ley

EQD | KOSPI 200 Sell-Off Could Accelerate This Week, But It's A BUY

The KOSPI 200 Index performed a modest pullback last week, entering the BUY area but caution is advised as further pullback is possible this...

Nico Rosti

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Korea FSS Releases Final Guidelines for Short Selling Compliance: Trading Implications

This morning, the Korea FSS released the final version of its short selling compliance guidelines. This post explores the guidelines and their...

Sanghyun Park

What We've Gathered Thus Far Regarding KOREA PREMIUM INDEX: Schedule, Methodology, & NPS

This post summarizes what the market has gathered thus far regarding the KOREA PREMIUM INDEX: schedule, methodology, and NPS participation.

Sanghyun Park

EQD | Asia Monthly Vol Roadmap: Elevated IV's in CSI300 and Hang Seng Present Tactical Opportunity

​Implied volatility levels across key Asian indices present several tactical opportunities this month for outright or pairs trades...

John Ley

Recently Observed Market Flow Movements Related to Korea's Value-Up Initiatives

Value-up remains pivotal in the Korean market's second half for market flow. This post investigates the recently observed movements related to the...

Sanghyun Park

EQD | KOSPI 200 Sell-Off Could Accelerate This Week, But It's A BUY

​The KOSPI 200 Index performed a modest pullback last week, entering the BUY area but caution is advised as further pullback is possible this...

Nico Rosti

Implied volatility levels across key Asian indices present several tactical opportunities this month for outright or pairs trades...

The KOSPI 200 Index performed a modest pullback last week, entering the BUY area but caution is advised as further pullback is possible this...