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 major framework of this realignment is likely decided, integrating KOSPI and KOSDAQ into a tiered system based on liquidity, market cap, and financial status, with periodic replacements.</li>
<li>The KOSPI 200's continued existence is uncertain under the new realignment plan, which may shift its role to the value-up index, resembling Japan’s market restructuring model.</li>
<li>The first-tier market's entry requirements will likely reflect value-up index criteria, suggesting greater speculative money movement toward the value-up index starting in September.</li>
</ul>


The major framework of this realignment is likely decided, integrating KOSPI and KOSDAQ into a tiered system based on liquidity, market cap, and financial status, with periodic replacements.
The KOSPI 200's continued existence is uncertain under the new realignment plan, which may shift its role to the value-up index, resembling Japan’s market restructuring model.
The first-tier market's entry requirements will likely reflect value-up index criteria, suggesting greater speculative money movement toward the value-up index starting in September.


KRX's Plan to Integrate KOSPI & KOSDAQ into a Tiered System: Trading Considerations

<ul>
<li>Today's press release unveils details on new flow trading events in Korea's local market from the second half of this year, highlighting two key points.</li>
<li>Firstly, the disclosure rule starts with block deals from August 23rd. Secondly, a 30% or greater stock price correction on disclosure day may cancel the transaction plan.</li>
<li>This highlights the need to consider cancellation risks in pre-disclosure positions and design setups with consideration for the potential for reverse flows as stock prices approach 30% corrections.</li>
</ul>


Today's press release unveils details on new flow trading events in Korea's local market from the second half of this year, highlighting two key points.
Firstly, the disclosure rule starts with block deals from August 23rd. Secondly, a 30% or greater stock price correction on disclosure day may cancel the transaction plan.
This highlights the need to consider cancellation risks in pre-disclosure positions and design setups with consideration for the potential for reverse flows as stock prices approach 30% corrections.


Details of Block Deal Pre-Disclosure Rule Disclosed: Cancellation Risk from 30% Price Correction

<ul>
<li>Kim Byung-hwan addressed criticism of weak incentives in tax support for the value-up policy, emphasizing boosting dividends. His background suggests effective advocacy for tax reforms in his new role.</li>
<li>He prioritized abolishing the FIIT in the National Assembly, citing its hindrance to capital market liquidity and investment promotion, indicating a robust approach to the value-up policy.</li>
<li>Kim’s appointment as FSC Chairman signals the government's commitment to advancing the value-up policy. He emphasizes boosting dividends and aligning tax policies accordingly, shaping trading strategies toward dividend-expanding companies.</li>
</ul>


Kim Byung-hwan addressed criticism of weak incentives in tax support for the value-up policy, emphasizing boosting dividends. His background suggests effective advocacy for tax reforms in his new role.
He prioritized abolishing the FIIT in the National Assembly, citing its hindrance to capital market liquidity and investment promotion, indicating a robust approach to the value-up policy.
Kim’s appointment as FSC Chairman signals the government's commitment to advancing the value-up policy. He emphasizes boosting dividends and aligning tax policies accordingly, shaping trading strategies toward dividend-expanding companies.


Impact of Kim Byung-Hwan's Appointment as Korea FSC Chairman on Value-Up Policy

<ul>
<li>Limiting extensions to four times after a 90-day repayment and mandating repayment after 12 months increases short-selling costs. The revision omits limits on position-holding cycles, disappointing retail investors.</li>
<li>Today's release did not set a timeline for short-selling resumption. The ruling party has requested it after March 2025, with key officials present suggesting next year March resumption.</li>
<li>Regarding the electronic system implementation, core content aligns with the draft, but newly revealed institution numbers add a new perspective. Uncertainties remain on integrating overseas stock borrowing into the system.</li>
</ul>


Limiting extensions to four times after a 90-day repayment and mandating repayment after 12 months increases short-selling costs. The revision omits limits on position-holding cycles, disappointing retail investors.
Today's release did not set a timeline for short-selling resumption. The ruling party has requested it after March 2025, with key officials present suggesting next year March resumption.
Regarding the electronic system implementation, core content aligns with the draft, but newly revealed institution numbers add a new perspective. Uncertainties remain on integrating overseas stock borrowing into the system.


Specifics of Korea's Official Short-Selling Regulations, Announced This Morning

<ul>
<li>Starting May 27th, KRX-listed firms can voluntarily disclose value-up details, publicly available on the website. Additionally, view five investment indicators for all KRX-listed companies below.</li>
<li>Finalized version similar to draft, with added content requested by listed companies, like R&amp;D investment growth rate. Tax incentives excluded, awaiting alignment with Ministry's plan in July.</li>
<li>KRX keeps a screening framework for the index akin to March's criteria, with ROE likely having the highest weight. Recent signals hint at increasing dividend weighting.</li>
</ul>


Starting May 27th, KRX-listed firms can voluntarily disclose value-up details, publicly available on the website. Additionally, view five investment indicators for all KRX-listed companies below.
Finalized version similar to draft, with added content requested by listed companies, like R&amp;D investment growth rate. Tax incentives excluded, awaiting alignment with Ministry's plan in July.
KRX keeps a screening framework for the index akin to March's criteria, with ROE likely having the highest weight. Recent signals hint at increasing dividend weighting.


KRX Announces Final Version of Value-Up Disclosure Guidelines Alongside Dedicated Website Launch

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)

KRX's Plan to Integrate KOSPI & KOSDAQ into a Tiered System: Trading Considerations

This post examines KRX's plan to integrate KOSPI and KOSDAQ into a tiered system based on promotion and demotion, similar to Japan's, and discusses...

Sanghyun Park

Details of Block Deal Pre-Disclosure Rule Disclosed: Cancellation Risk from 30% Price Correction

This post outlines the block deal pre-disclosure rule officially released today by Korea FSC, highlighting two key points, notably the risk of...

Sanghyun Park

Impact of Kim Byung-Hwan's Appointment as Korea FSC Chairman on Value-Up Policy

This post explores how Kim Byung-hwan's appointment as the new Chairman of Korea's FSC impacts the local market's value-up policy.

Sanghyun Park

Specifics of Korea's Official Short-Selling Regulations, Announced This Morning

This post outlines the details of Korea's newly updated short selling regulations, which were officially announced this morning by the ruling party...

Sanghyun Park

KRX Announces Final Version of Value-Up Disclosure Guidelines Alongside Dedicated Website Launch

This post covers KRX's latest unveiling of the finalized value-up guidelines and the launch of the dedicated website. It also delves into KRX's...

Sanghyun Park