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 Index / Event-Driven

<ul>
<li>The impeachment motion against President Yoon passed in the South Korean National Assembly, clearing the two-thirds supermajority, and is now official.</li>
<li>For the impeachment to fail, four justices must oppose it—highly unlikely given the current setup. The odds are heavily in favor of the impeachment being upheld.</li>
<li>Corporate law reforms, driven by a likely Democratic Party takeover, could fuel value-up momentum and drive the local market, potentially sparking an unexpected rally through the May election.</li>
</ul>


The impeachment motion against President Yoon passed in the South Korean National Assembly, clearing the two-thirds supermajority, and is now official.
For the impeachment to fail, four justices must oppose it—highly unlikely given the current setup. The odds are heavily in favor of the impeachment being upheld.
Corporate law reforms, driven by a likely Democratic Party takeover, could fuel value-up momentum and drive the local market, potentially sparking an unexpected rally through the May election.


Yoon's Impeachment Passed: Upcoming Schedule, Procedures, and Market Impact

<ul>
<li>Martial law has been declared 11 times since 1945, but this is the first since Korea’s post-‘90 democratization.</li>
<li>The Martial Law Command's first proclamation blocks parliament, raising legal questions about its constitutionality and making any immediate attempt to end martial law uncertain.</li>
<li>Defense and telecom stocks could outperform short-term due to martial law, making them strong trading targets to watch.</li>
</ul>


Martial law has been declared 11 times since 1945, but this is the first since Korea’s post-‘90 democratization.
The Martial Law Command's first proclamation blocks parliament, raising legal questions about its constitutionality and making any immediate attempt to end martial law uncertain.
Defense and telecom stocks could outperform short-term due to martial law, making them strong trading targets to watch.


Breaking: Korea Drops Martial Law, Local Markets in Turmoil—What’s the Short-Term Trade Play Here?

<ul>
<li>The rule's real impact isn't exposing which institutions are shorting stocks, as much of Korea's short-selling is done via swaps (TRS).</li>
<li>The key takeaway is that more stocks require mandatory disclosure as lowering the threshold to 0.01% makes it tougher for local brokers to avoid reporting.</li>
<li>Local and foreign institutions use a single Prime Brokerage Service (PBS) for borrowing efficiency, especially with smaller stocks, aiding in retail access and revealing short-selling strategies amid new disclosure rules.</li>
</ul>


The rule's real impact isn't exposing which institutions are shorting stocks, as much of Korea's short-selling is done via swaps (TRS).
The key takeaway is that more stocks require mandatory disclosure as lowering the threshold to 0.01% makes it tougher for local brokers to avoid reporting.
Local and foreign institutions use a single Prime Brokerage Service (PBS) for borrowing efficiency, especially with smaller stocks, aiding in retail access and revealing short-selling strategies amid new disclosure rules.


Korea's New Short-Selling Balance Reporting Rules Starting December 1: Key Trading Insights

<ul>
<li>MMAS prioritizes dividends over low-PBR, key to government's Value-up momentum. Despite initial market disappointment, dividend stocks rebounded, underscoring continued investor interest.</li>
<li>Government officials are collecting historic dividend data to simulate separate taxation impact of dividend income, likely to be included in July's tax reform bill for National Assembly approval.</li>
<li>Local institutions focus on dividend-centric Value-up trading, targeting stocks with high cash reserves and dividends. Strategy needed to manage market impact pre-tax reform bill in July.</li>
</ul>


MMAS prioritizes dividends over low-PBR, key to government's Value-up momentum. Despite initial market disappointment, dividend stocks rebounded, underscoring continued investor interest.
Government officials are collecting historic dividend data to simulate separate taxation impact of dividend income, likely to be included in July's tax reform bill for National Assembly approval.
Local institutions focus on dividend-centric Value-up trading, targeting stocks with high cash reserves and dividends. Strategy needed to manage market impact pre-tax reform bill in July.


Local Institutions' Value-Up Momentum Moves: Watch the July Tax Reform Bill

<ul>
<li>Today, NPS made the final decision to introduce a reference portfolio. The critical point is the increase in risky assets from 56% to 65%, also decided at today's meeting.</li>
<li>Initially, overseas equity was prioritized, but recent forecasts suggest significant potential in increasing local equity, aligning with the value-up policy.</li>
<li>Monitoring NPS's execution plan, including allocation and timing by asset class, is vital to gauge inflow size, especially for Value-up beneficiaries.</li>
</ul>


Today, NPS made the final decision to introduce a reference portfolio. The critical point is the increase in risky assets from 56% to 65%, also decided at today's meeting.
Initially, overseas equity was prioritized, but recent forecasts suggest significant potential in increasing local equity, aligning with the value-up policy.
Monitoring NPS's execution plan, including allocation and timing by asset class, is vital to gauge inflow size, especially for Value-up beneficiaries.


NPS Confirms Reference Portfolio & Risky Assets Upweight: Implications for Value-Up Stocks

South Korea

The KOSPI Index is a capitalization-weighted index of all common shares on the Korean Stock Exchanges. The Index was developed with a base value of 100 as of January 4, 1980. Note: The preferred shares are excluded in calculating the KOSPI Index from June 14, 2002. 

Korea Stock Exchange Kospi Index (KOSPI INDEX)

Korea Stock Exchange Kospi Index (KOSPI INDEX)

Yoon's Impeachment Passed: Upcoming Schedule, Procedures, and Market Impact

This post details Yoon's impeachment approval in South Korea's National Assembly: upcoming schedule, procedures, and local stock market impact.

Sanghyun Park

Breaking: Korea Drops Martial Law, Local Markets in Turmoil—What’s the Short-Term Trade Play Here?

Breaking news: Korea has declared martial law, causing local markets to be in turmoil—what’s the short-term trading strategy moving forward?

Sanghyun Park

Korea's New Short-Selling Balance Reporting Rules Starting December 1: Key Trading Insights

Kicking off December 1, we’ve got new mandatory short-selling balance reporting rules coming into play: Here are the key things to keep an eye on...

Sanghyun Park

Local Institutions' Value-Up Momentum Moves: Watch the July Tax Reform Bill

This post delves into local institutions' focus on dividends over low-PBR in Value-up momentum trading, with anticipation surrounding the July tax...

Sanghyun Park

NPS Confirms Reference Portfolio & Risky Assets Upweight: Implications for Value-Up Stocks

This post outlines Korea NPS's decision to adopt the reference portfolio, raising risky assets allocation weight by 9%p to 65%, and its...

Sanghyun Park