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>The value-up index aims to align closely with the KOSPI 200's composition, adjusting stock weights based on factors from KRX Governance Leaders 100 and KRX ESG Dividend Opportunities Index.</li>
<li>Insiders confirm NPS will create new funds to track the value-up index, needing SAA adjustments and Fund Management Committee approval. Despite hurdles, government backing suggests smooth NPS involvement.</li>
<li>Buybacks could cause passive outflows in KOSPI 200 rebalancing and inflows in value-up index rebalancing. This timing discrepancy could create a consistent passive flow pattern for these stocks.</li>
</ul>


The value-up index aims to align closely with the KOSPI 200's composition, adjusting stock weights based on factors from KRX Governance Leaders 100 and KRX ESG Dividend Opportunities Index.
Insiders confirm NPS will create new funds to track the value-up index, needing SAA adjustments and Fund Management Committee approval. Despite hurdles, government backing suggests smooth NPS involvement.
Buybacks could cause passive outflows in KOSPI 200 rebalancing and inflows in value-up index rebalancing. This timing discrepancy could create a consistent passive flow pattern for these stocks.


Latest Info on Value-Up Index Involving KRX & NPS: Potential Flow Trading Patterns

<ul>
<li>Lee urgently appeard on TV today and said, "In June, we will explain whether and when short selling will be resumed, and what criteria we might use for the resumption."</li>
<li>He noted considering flexible partial short selling resumption even if only some conditions are met, contrasting the Presidential Office's stance from two days ago.</li>
<li>Presidential Office led short selling ban, now likely under FSC/FSS jurisdiction for resumption.</li>
</ul>


Lee urgently appeard on TV today and said, "In June, we will explain whether and when short selling will be resumed, and what criteria we might use for the resumption."
He noted considering flexible partial short selling resumption even if only some conditions are met, contrasting the Presidential Office's stance from two days ago.
Presidential Office led short selling ban, now likely under FSC/FSS jurisdiction for resumption.


FSS Head Lee Made an Urgent TV Appearance Today to Discuss the Resumption of Short Selling

<ul>
<li>There is a prevailing sentiment in the local market that short selling by market makers (MM) and liquidity providers (LP) will effectively be prohibited very shortly.</li>
<li>The widening of the futures basis extends the influence of futures on the spot market prices. This is precisely where trading opportunities that we should be keenly observing may arise.</li>
<li>It also leads to a significant widening of ETF tracking errors due to the direct sell-off of underlying shares. We must capitalize on extreme spreads in ETFs.</li>
</ul>


There is a prevailing sentiment in the local market that short selling by market makers (MM) and liquidity providers (LP) will effectively be prohibited very shortly.
The widening of the futures basis extends the influence of futures on the spot market prices. This is precisely where trading opportunities that we should be keenly observing may arise.
It also leads to a significant widening of ETF tracking errors due to the direct sell-off of underlying shares. We must capitalize on extreme spreads in ETFs.


New Phase in Korean Short Selling: Immediate Impact of MM and LP Short Selling Ban

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>Korea banned all short selling in March 2020 and resumed short selling only on <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">KOSPI 200</a> and <a href="https://www.smartkarma.com/entities/kosdaq-150-index" target="_blank" data-smartkarma-citation="entities:31077:1" rel="noopener">KOSDAQ 150</a> index constituents in May 2021.</li>
<li>News reports indicate that there could be another short sell ban as soon as the coming week. Indications are that the ban could last 6 months.</li>
<li>There are many implications of a total short sell ban including futures backwardation, market manipulation, and no emerging to developed market promotion.</li>
</ul>


Korea banned all short selling in March 2020 and resumed short selling only on KOSPI 200 and KOSDAQ 150 index constituents in May 2021.
News reports indicate that there could be another short sell ban as soon as the coming week. Indications are that the ban could last 6 months.
There are many implications of a total short sell ban including futures backwardation, market manipulation, and no emerging to developed market promotion.


Korea Short Sell Ban: Background, Manipulation, Holdings, Flows, Short Interest, Implications

Samsung Electronics Pref Shares / Event-Driven

<ul>
<li>Over the last year, the discount of <a href="https://www.smartkarma.com/entities/samsung-electronics-pref-shares" target="_blank" data-smartkarma-citation="entities:23591:1" rel="noopener">Samsung Electronics Pref Shares (005935 KS)</a> to <a href="https://www.smartkarma.com/entities/samsung-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:191:1" rel="noopener">Samsung Electronics (005930 KS)</a> has increased from 5% to 17%.</li>
<li>The preferred shares have adequate liquidity, a large issue market cap, and now trade at a much higher dividend yield. A special dividend will further increase the dividend yield differential.</li>
<li>Breaking from history, the preferred shares discount has continued to increase as the stock has moved higher. With the preferred shares trading near its widest discount, that could change.</li>
</ul>


Over the last year, the discount of Samsung Electronics Pref Shares (005935 KS) to Samsung Electronics (005930 KS) has increased from 5% to 17%.
The preferred shares have adequate liquidity, a large issue market cap, and now trade at a much higher dividend yield. A special dividend will further increase the dividend yield differential.
Breaking from history, the preferred shares discount has continued to increase as the stock has moved higher. With the preferred shares trading near its widest discount, that could change.


Samsung Electronics: Prefs Need to Catch Up

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)

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Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX EQUITY)

Latest Info on Value-Up Index Involving KRX & NPS: Potential Flow Trading Patterns

This post gathers the latest info on the value-up index involving Korea Exchange and National Pension Service and investigates potential flow...

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FSS Head Lee Made an Urgent TV Appearance Today to Discuss the Resumption of Short Selling

This post highlights Korea FSS Head Lee Bok-hyun's televised remarks today on short-selling resumption and examines their implications

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New Phase in Korean Short Selling: Immediate Impact of MM and LP Short Selling Ban

This post explores the immediate market impact resulting from the potential prohibition of short selling by Market Makers (MM) and Liquidity...

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Korea Short Sell Ban: Background, Manipulation, Holdings, Flows, Short Interest, Implications

Media reports indicate that there could be a temporary short sell ban in Korea. This could lead to futures backwardation, market manipulation and a...

Brian Freitas

Samsung Electronics: Prefs Need to Catch Up

Samsung Electronics preferred shares have a large market cap, are liquid, and offer a higher div yield compared to the ordinary shares. With the...

Brian Freitas

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52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)