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>Local market information indicates potential collaboration between KRX, FSS, and KSD to create a Korean EquiLend, aiming to centralize the stock lending channel.</li>
<li>Unprecedented globally, President Yoon aims to centralize short selling. The challenge lies in mandating foreign investors to use Korea's platform, necessitating a complex legal framework.</li>
<li>Despite the difficulty, local authorities are compelled to pursue this initiative, raising the likelihood of a Korean EquiLend. Developing strategic plans in response is imperative.</li>
</ul>


Local market information indicates potential collaboration between KRX, FSS, and KSD to create a Korean EquiLend, aiming to centralize the stock lending channel.
Unprecedented globally, President Yoon aims to centralize short selling. The challenge lies in mandating foreign investors to use Korea's platform, necessitating a complex legal framework.
Despite the difficulty, local authorities are compelled to pursue this initiative, raising the likelihood of a Korean EquiLend. Developing strategic plans in response is imperative.


Korea's Short Selling Ban to Stay, Likely Until EquiLend-Korean Version Launch

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Douglas Research Advisory

Cross Asset Strategy

<ul>
<li>On 19 November, the Financial Services Commission (FSC) announced major rule changes on corporate mergers and acquisitions have been approved by the Korean government.</li>
<li>Revised rules have three specific goals: Improve rules on calculating and determining merger prices when M&amp;As take place between nonaffiliated business entities, strengthen disclosure duties, and improve external evaluation system.</li>
<li>If the Korean government is really serious about making positive rule changes, they need to apply these new laws not just for NON-AFFILIATED companies but more importantly for AFFIILATED companies.</li>
</ul>


On 19 November, the Financial Services Commission (FSC) announced major rule changes on corporate mergers and acquisitions have been approved by the Korean government.
Revised rules have three specific goals: Improve rules on calculating and determining merger prices when M&amp;As take place between nonaffiliated business entities, strengthen disclosure duties, and improve external evaluation system.
If the Korean government is really serious about making positive rule changes, they need to apply these new laws not just for NON-AFFILIATED companies but more importantly for AFFIILATED companies.


Major M&A Rule Changes Approved by the Korean Government

<ul>
<li>Concerning the newly imposed 90-day mandatory repayment period for institutional investors, the elimination of the recall risk during this period is not included in this improvement plan.</li>
<li>The right to re-establish the same short-selling position after the 90-day repayment period is unlimited. We should pay attention to the potential of this creating new trading events.</li>
<li>Institutions borrowing stocks from overseas are not subject to the 105% collateral ratio. However, everyone is subject to the 90-day repayment period, even for investors who borrow stocks from overseas.</li>
</ul>


Concerning the newly imposed 90-day mandatory repayment period for institutional investors, the elimination of the recall risk during this period is not included in this improvement plan.
The right to re-establish the same short-selling position after the 90-day repayment period is unlimited. We should pay attention to the potential of this creating new trading events.
Institutions borrowing stocks from overseas are not subject to the 105% collateral ratio. However, everyone is subject to the 90-day repayment period, even for investors who borrow stocks from overseas.


Breaking Down Korean Regulators' Official Details on New Short Selling System

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>
<a href="https://www.smartkarma.com/entities/paradise-co-ltd" target="_blank" data-smartkarma-citation="entities:14940:1" rel="noopener">Paradise Co Ltd (034230 KS)</a> will move from the KOSDAQ Market to the KOSPI Market from the open of trading on 24 June.</li>
<li>
<a href="https://www.smartkarma.com/entities/e-d-co-ltd" target="_blank" data-smartkarma-citation="entities:29151:1" rel="noopener">E&amp;D Co Ltd (101360 KS)</a> will be added to the <a href="https://www.smartkarma.com/entities/kosdaq-150-index" target="_blank" data-smartkarma-citation="entities:31077:1" rel="noopener">KOSDAQ 150 Index (KOSDQ150 INDEX)</a> at the close on 21 June to replace <a href="https://www.smartkarma.com/entities/paradise-co-ltd" target="_blank" data-smartkarma-citation="entities:14940:1" rel="noopener">Paradise Co Ltd (034230 KS)</a>. </li>
<li>
<a href="https://www.smartkarma.com/entities/paradise-co-ltd" target="_blank" data-smartkarma-citation="entities:14940:1" rel="noopener">Paradise Co Ltd (034230 KS)</a> belongs to the Consumer Discretionary sector and there is a possibility of inclusion to the <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX)</a> in December.</li>
</ul>



Paradise Co Ltd (034230 KS) will move from the KOSDAQ Market to the KOSPI Market from the open of trading on 24 June.

E&amp;D Co Ltd (101360 KS) will be added to the KOSDAQ 150 Index (KOSDQ150 INDEX) at the close on 21 June to replace Paradise Co Ltd (034230 KS). 

Paradise Co Ltd (034230 KS) belongs to the Consumer Discretionary sector and there is a possibility of inclusion to the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) in December.


KOSDAQ150 Adhoc Index Rebalance: Eco&Dream to Replace Paradise Co

Korea Stock Exchange KOSPI 200 / Event-Driven

<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

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's Short Selling Ban to Stay, Likely Until EquiLend-Korean Version Launch

Lee Bok-hyun, head of FSS, discussed progress in short selling computerization publicly yesterday on KBS. He confirmed collaboration between the...

Sanghyun Park

Major M&A Rule Changes Approved by the Korean Government

On 19 November, the Financial Services Commission (FSC) announced major rule changes on corporate mergers and acquisitions have been approved by...

Douglas Kim

Breaking Down Korean Regulators' Official Details on New Short Selling System

This post breaks down the details of the short selling system improvement measures officially presented by Korean regulatory authorities.

Sanghyun Park

KOSDAQ150 Adhoc Index Rebalance: Eco&Dream to Replace Paradise Co

Eco&Dream will replace Paradise Co in the KOSDAQ150 Index at the close on Friday. Paradise Co could be added to the KOSPI200 Index in December...

Brian Freitas

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