Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<ul>
<li>This is the second weekly series on the "Top 20 Best Performers in the Korean Stock Market Adjusted for Trading Value &amp; Mkt Cap." </li>
<li>Starting this weekly, we include stocks in both KOSPI and KOSDAQ. All the stocks in KOSPI and KOSDAQ are ranked, adjusted for market cap and trading value. </li>
<li>Among the top 20 performers, NCSoft, Hyundai Motor, Kia Motors, Dohwa Engineering, DB Hitek, SK Telecom, and KT Corp were included. </li>
</ul>


This is the second weekly series on the "Top 20 Best Performers in the Korean Stock Market Adjusted for Trading Value &amp; Mkt Cap." 
Starting this weekly, we include stocks in both KOSPI and KOSDAQ. All the stocks in KOSPI and KOSDAQ are ranked, adjusted for market cap and trading value. 
Among the top 20 performers, NCSoft, Hyundai Motor, Kia Motors, Dohwa Engineering, DB Hitek, SK Telecom, and KT Corp were included. 


Top 20 Best Performers in the Korean Stock Market (Week of 13 May)

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<ul>
<li>Downtrends remain intact for Japan’s TOPIX/Nikkei 225, Hong Kong’s Hang Seng, Europe’s EURO STOXX50, Germany's DAX, China (MCHI-US), and all the MSCI global indexes (ACWI, ACWI ex-US, EM, and EAFE).</li>
<li>The majority of these indexes are in well-defined downtrends; that means when the downtrends eventually reverse, it will be clear and we will be ready to buy/turn bullish.</li>
<li>Relative strength on Japan's TOPIX is reversing topside a 4.5-year downtrend, signaling Japan is emerging as leadership. We highlight buy opportunities in Japan and also in defensive Sectors</li>
</ul>


Downtrends remain intact for Japan’s TOPIX/Nikkei 225, Hong Kong’s Hang Seng, Europe’s EURO STOXX50, Germany's DAX, China (MCHI-US), and all the MSCI global indexes (ACWI, ACWI ex-US, EM, and EAFE).
The majority of these indexes are in well-defined downtrends; that means when the downtrends eventually reverse, it will be clear and we will be ready to buy/turn bullish.
Relative strength on Japan's TOPIX is reversing topside a 4.5-year downtrend, signaling Japan is emerging as leadership. We highlight buy opportunities in Japan and also in defensive Sectors


Japan Emerging as Leadership; Actionable Themes: Japan and Defensives

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

<ul>
<li>ADRs are traded at a significant premium when the foreign room for underlying shares is exhausted. This is the pattern that KT showed in 2018.</li>
<li>SKT's foreign room is currently 1.85%. That is, the burnout rate is 98.15%. Only about 2M shares need to be burned to hit bottom. This is 0.91% of SO.</li>
<li>The shortage of SKT ADRs is likely to intensify, which in turn suggests that the ADR premium may rise further.</li>
</ul>


ADRs are traded at a significant premium when the foreign room for underlying shares is exhausted. This is the pattern that KT showed in 2018.
SKT's foreign room is currently 1.85%. That is, the burnout rate is 98.15%. Only about 2M shares need to be burned to hit bottom. This is 0.91% of SO.
The shortage of SKT ADRs is likely to intensify, which in turn suggests that the ADR premium may rise further.


Trading Opportunity Coming on SK Telecom ADR Premium

<ul>
<li>On 27 April, Bloomberg reported that KT Corp is considering a partial sale of its newly created cloud business unit.</li>
<li>It is estimated that a sale of about 20% stake in KT Cloud could raise approximately $400 million, which would value KT Cloud business at $2 billion.</li>
<li>A key reason why the major telcos' share prices were down today was because of reports that the incoming Yoon Seok-Yeol administration is pressuring telcos to lower 5G tariff rates.</li>
</ul>


On 27 April, Bloomberg reported that KT Corp is considering a partial sale of its newly created cloud business unit.
It is estimated that a sale of about 20% stake in KT Cloud could raise approximately $400 million, which would value KT Cloud business at $2 billion.
A key reason why the major telcos' share prices were down today was because of reports that the incoming Yoon Seok-Yeol administration is pressuring telcos to lower 5G tariff rates.


KT Considering a Partial Sale of Its Cloud Business & Concerns About Tariff Rate Cut for 5G Services

<ul>
<li>Kakao Pay's six months end of the lock-up period comes up on 3 May, which could further put negative pressure on its share price. </li>
<li>Other factors including heightened competition, lack of margin improvement in 2021, and lifting nearly all social distancing measures in Korea are likely to further negatively impact Kakao Pay. </li>
<li>We expect additional 20 to 30%+ downside risk for Kakao Pay from current levels over the next 6-12 months. </li>
</ul>


Kakao Pay's six months end of the lock-up period comes up on 3 May, which could further put negative pressure on its share price. 
Other factors including heightened competition, lack of margin improvement in 2021, and lifting nearly all social distancing measures in Korea are likely to further negatively impact Kakao Pay. 
We expect additional 20 to 30%+ downside risk for Kakao Pay from current levels over the next 6-12 months. 


Kakao Pay: End of 6 Months Lock-Up Period Could Further Put Negative Pressure on Share Price

South Korea

KT Corporation provides telecommunication services including local, long distance, and international calling, satellite communication, data transmission, and wireless telephone services in South Korea.  The Company also offers network portal and high-speed Internet access services using asymmetric digital subscriber lines (ADSLs).

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KT Corp Sp Adr (KT US)

Top 20 Best Performers in the Korean Stock Market (Week of 13 May)

This is the second weekly series on the "Top 20 Best Performers in the Korean Stock Market Adjusted for Trading Value & Mkt Cap." Starting this...

Douglas Kim

Japan Emerging as Leadership; Actionable Themes: Japan and Defensives

Despite the intact downtrend on Japan's TOPIX, relative strength is reversing topside a 4.5-year downtrend; this tells us Japan is emerging as...

Vermilion Research

Trading Opportunity Coming on SK Telecom ADR Premium

This post examines the trading opportunities that will likely arise on SK Telecom's ADR premium to the underlying share.

Sanghyun Park

KT Considering a Partial Sale of Its Cloud Business & Concerns About Tariff Rate Cut for 5G Services

On 27 April, Bloomberg reported that KT Corp is considering a partial sale of its newly created cloud business unit. A 20% stake sale in KT Cloud...

Douglas Kim

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