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

Korea Stock Exchange Kospi Index / Event-Driven

<ul>
<li>Media reports indicate that the National Pension Service (NPS) could invest up to KRW 11tn (US$8.2bn) in a new index tracking stocks with low Price to Book ratios.</li>
<li>Filtering stocks with market cap higher than US$500m, ADTV of atleast US$1m, div yield of atleast 1.5% and Price to Book less than 1 throws up 94 potential index candidates.</li>
<li>Choosing an index of 50 stocks will require managers to buy between 1.7-3.4% of the float on the stocks. Increasing the number of constituents will reduce the impact.</li>
</ul>


Media reports indicate that the National Pension Service (NPS) could invest up to KRW 11tn (US$8.2bn) in a new index tracking stocks with low Price to Book ratios.
Filtering stocks with market cap higher than US$500m, ADTV of atleast US$1m, div yield of atleast 1.5% and Price to Book less than 1 throws up 94 potential index candidates.
Choosing an index of 50 stocks will require managers to buy between 1.7-3.4% of the float on the stocks. Increasing the number of constituents will reduce the impact.


Korea Value-Up Index: Probable Constituents & Impact of NPS' US$8.2bn Allocation

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.

<ul>
<li>A new tax support framework for Korea's value-up policy was introduced, but local markets argue that proportionate protection for minority shareholders is crucial for a significant market value increase.</li>
<li>Korean political leaders are united in supporting this amendment to the Commercial Act, with recent events increasing the likelihood of bipartisan support for this crucial change.</li>
<li>Given the administration's commitment to the value-up and recent negative sentiment towards recent restructurings at Doosan and SK, there's growing potential for minority shareholder protection to take root in Korea.</li>
</ul>


A new tax support framework for Korea's value-up policy was introduced, but local markets argue that proportionate protection for minority shareholders is crucial for a significant market value increase.
Korean political leaders are united in supporting this amendment to the Commercial Act, with recent events increasing the likelihood of bipartisan support for this crucial change.
Given the administration's commitment to the value-up and recent negative sentiment towards recent restructurings at Doosan and SK, there's growing potential for minority shareholder protection to take root in Korea.


Why Is Proportionate Shareholder Protection Key to Korea's Value-Up, and What Is Its Status?

<ul>
<li>The highest dividend tax rate drops from 49.5% to 25%, leading the local capital market to view the reform as more shareholder-focused than company-focused.</li>
<li>The top inheritance tax rate drops from the 60% range to 40%, a meaningful reduction for conglomerates like Hyundai and Hanwha, though below initial expectations.</li>
<li>Tax incentives in the reform are less aggressive than expected, with modest corporate and inheritance tax cuts. However, this compromise increases the likelihood of its passage, boosting short-term market expectations.</li>
</ul>


The highest dividend tax rate drops from 49.5% to 25%, leading the local capital market to view the reform as more shareholder-focused than company-focused.
The top inheritance tax rate drops from the 60% range to 40%, a meaningful reduction for conglomerates like Hyundai and Hanwha, though below initial expectations.
Tax incentives in the reform are less aggressive than expected, with modest corporate and inheritance tax cuts. However, this compromise increases the likelihood of its passage, boosting short-term market expectations.


Overall Assessment of the Value-Up Policy-Related Aspects of the Tax Reform Plan Released Today

<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>KRX's lack of a standardized English translation platform may lead to non-standardized terminology and varying translation quality. KRX stresses cross-checking Korean and English disclosures due to potential errors. </li>
<li>The 3-day lag between Korean and English disclosures poses timeliness challenges, requiring consistent cross-checking. Overall, the process for foreign investors using Korean market disclosure sites remains largely unchanged.</li>
<li>The common procedure should still be to first check disclosures using English titles, then convert to Korean for reading. If English disclosures exist, utilize them for cross-checking.</li>
</ul>


KRX's lack of a standardized English translation platform may lead to non-standardized terminology and varying translation quality. KRX stresses cross-checking Korean and English disclosures due to potential errors. 
The 3-day lag between Korean and English disclosures poses timeliness challenges, requiring consistent cross-checking. Overall, the process for foreign investors using Korean market disclosure sites remains largely unchanged.
The common procedure should still be to first check disclosures using English titles, then convert to Korean for reading. If English disclosures exist, utilize them for cross-checking.


KRX's Mandatory English Disclosure Debut: A Detailed Guide on Utilizing This Without Confusion

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)

Korea Value-Up Index: Probable Constituents & Impact of NPS' US$8.2bn Allocation

The NPS and KRW as said to be discussing the creation of the Korea Value-Up Index and the NPS could benchmark KRW 11tn to the index. We look at...

Brian Freitas

Why Is Proportionate Shareholder Protection Key to Korea's Value-Up, and What Is Its Status?

As the financial authorities are pushing forward with a corporate value-up program, the Democratic Party of Korea (DPK), the majority party in the...

Sanghyun Park

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

KRX's Mandatory English Disclosure Debut: A Detailed Guide on Utilizing This Without Confusion

This post is a comprehensive guide on utilizing KRX's inaugural mandatory English disclosures without confusion, which began today.

Sanghyun Park

Korea Value-Up Index: Probable Constituents & Impact of NPS' US$8.2bn Allocation

The NPS and KRW as said to be discussing the creation of the Korea Value-Up Index and the NPS could benchmark KRW 11tn to the index. We look at...

Brian Freitas

Why Is Proportionate Shareholder Protection Key to Korea's Value-Up, and What Is Its Status?

As the financial authorities are pushing forward with a corporate value-up program, the Democratic Party of Korea (DPK), the majority party in the...

Sanghyun Park

Overall Assessment of the Value-Up Policy-Related Aspects of the Tax Reform Plan Released Today

This post provides an overall assessment of the value-up policy-related aspects of Korea's tax reform plan released today.

Sanghyun Park

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

KRX's Mandatory English Disclosure Debut: A Detailed Guide on Utilizing This Without Confusion

This post is a comprehensive guide on utilizing KRX's inaugural mandatory English disclosures without confusion, which began today.

Sanghyun Park