Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Cross Asset Strategy

<div class="content-highlight"><p>According to the KRX, it plans to launch new indices which would include the top 10 stocks in KOSPI including <a href="https://www.smartkarma.com/entities/samsung-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:191:1" rel="noopener">Samsung Electronics (005930 KS)</a>. The name of this index is expected to be called <strong>KOSPI 200 Top 10.</strong> There will also be 2x levered indices based off the KOSPI 200 Top 10 index. These indices will be catered for those investors that are interested in the highest market cap companies within KOSPI 200.</p></div><p>Currently, the top 10 constitutents of the KOSPI 200 Top 10 Index will be expected to be composed of the following:</p><ol>
<li>
<a href="https://www.smartkarma.com/entities/samsung-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:191:1" rel="noopener">Samsung Electronics (005930 KS)</a> </li>
<li>
<a href="https://www.smartkarma.com/entities/sk-hynix-inc" target="_blank" data-smartkarma-citation="entities:16955:1" rel="noopener">SK Hynix (000660 KS)</a> </li>
<li>
<a href="https://www.smartkarma.com/entities/lg-chem-ltd" target="_blank" data-smartkarma-citation="entities:3583:1" rel="noopener">LG Chem Ltd (051910 KS)</a> </li>
<li>
<a href="https://www.smartkarma.com/entities/naver-corp" target="_blank" data-smartkarma-citation="entities:16029:1" rel="noopener">Naver Corp (035420 KS)</a> </li>
<li>
<a href="https://www.smartkarma.com/entities/hyundai-motor-co" target="_blank" data-smartkarma-citation="entities:155:1" rel="noopener">Hyundai Motor Co (005380 KS)</a> </li>
<li>
<a href="https://www.smartkarma.com/entities/samsung-sdi-co-ltd" target="_blank" data-smartkarma-citation="entities:503:1" rel="noopener">Samsung SDI (006400 KS)</a> </li>
<li>
<a href="https://www.smartkarma.com/entities/celltrion-inc" target="_blank" data-smartkarma-citation="entities:991:1" rel="noopener">Celltrion Inc (068270 KS)</a> </li>
<li>
<a href="https://www.smartkarma.com/entities/kakao-corp" target="_blank" data-smartkarma-citation="entities:15002:1" rel="noopener">Kakao Corp (035720 KS)</a> </li>
<li>
<a href="https://www.smartkarma.com/entities/kia-motors-corp" target="_blank" data-smartkarma-citation="entities:156:1" rel="noopener">Kia Motors Corp (000270 KS)</a> </li>
<li>
<a href="https://www.smartkarma.com/entities/hyundai-mobis-co-ltd" target="_blank" data-smartkarma-citation="entities:6089:1" rel="noopener">Hyundai Mobis (012330 KS)</a> </li>
</ol>

According to the KRX, it plans to launch new indices which would include the top 10 stocks in KOSPI including Samsung Electronics (005930 KS). The name of this index is expected to be called KOSPI 200 Top 10. There will also be 2x levered indices based off the KOSPI 200 Top 10 index. These indices will be catered for those investors that are interested in the highest market cap companies within KOSPI 200.Currently, the top 10 constitutents of the KOSPI 200 Top 10 Index will be expected to be composed of the following:

Samsung Electronics (005930 KS) 

SK Hynix (000660 KS) 

LG Chem Ltd (051910 KS) 

Naver Corp (035420 KS) 

Hyundai Motor Co (005380 KS) 

Samsung SDI (006400 KS) 

Celltrion Inc (068270 KS) 

Kakao Corp (035720 KS) 

Kia Motors Corp (000270 KS) 

Hyundai Mobis (012330 KS) 


KRX Plans to Launch a New Index Called 'KOSPI 200 Top 10'

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

<p>Korea's local sector ETFs do not usually attract the spotlight as most of them are pretty insignificant in AUM. But a few sector index-mirroring ETFs are quite different. They are as hot as the flagship KOSPI 200-tracking ETFs.</p><p>The secondary battery sector ETFs are these exceptions. The extreme popularity of the secondary battery sector-ETFs bodes well for the level of investor interest sitting on the sector itself.</p><h2>How hot are they really?</h2><div>
<p>For instance, let's look at the KRX K-New Deal Index.</p>
<p>It has one mother index named the KRX BBIG K-New Deal Index, under which there are four sub-indices. BBIG stands for Battery, Bio, Internet, and Game, representing the four sectors that the New Deal initiative features.</p>
<div>
<p>The main index contains 12 large-cap stocks, three of which are from each of the four sectors. We then have four sub-indices, one for each sector. Each sub-index has 10 constituents, selected mainly based on the full market capitalization.</p>
<p>The mother index has three ETFs, and each of the four sub-indices has one ETF. The mother index's combined AUM stands at ₩529.2B at the last close. But the sub-index for the secondary battery has a total of ₩812.8B in AUM, substantially more than the mother index and simply incomparable to the other three sub-indices.</p>
</div>
</div><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td style="width: 317.216px;" data-sheets-value='{"1":2,"2":"K-New Deal tracking ETFs"}'>K-New Deal tracking ETFs</td>
<td style="width: 189.531px;" data-sheets-value='{"1":2,"2":"Index"}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}'>Index</td>
<td style="text-align: right; width: 78.2955px;" data-sheets-value='{"1":2,"2":"Ticker"}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}'>Ticker</td>
<td style="text-align: right; width: 77.983px;" data-sheets-value='{"1":2,"2":"Market cap"}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}'>Market cap</td>
</tr>
<tr>
<td style="width: 317.216px;" data-sheets-value='{"1":2,"2":"Mirae Asset TIGER KRX BBIG K-New Deal ETF"}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}' data-sheets-formula='=googlefinance(R[0]C[2], "name")'>Mirae Asset TIGER KRX BBIG K-New Deal ETF</td>
<td colspan="1" rowspan="4" style="width: 189.531px;" data-sheets-value='{"1":2,"2":"KRX BBIG K-New Deal Index"}' data-sheets-numberformat='{"1":1}'><div><strong>KRX BBIG K-New Deal Index</strong></div></td>
<td style="text-align: right; width: 78.2955px;" data-sheets-value='{"1":2,"2":"364960"}' data-sheets-numberformat='{"1":1}' data-sheets-formula='="364960"'>364960</td>
<td style="text-align: right; width: 77.983px;" data-sheets-value='{"1":3,"3":497.352}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[0]C[1]*R[0]C[2]/1000000000">₩497.4B</td>
</tr>
<tr>
<td style="width: 317.216px;" data-sheets-value='{"1":2,"2":"Hana Financial Investment Hana KRX BBIG K-New Deal ETN 3"}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}' data-sheets-formula='=googlefinance(R[0]C[2], "name")'>Hana Financial Investment Hana KRX BBIG K-New Deal ETN 3</td>
<td style="text-align: right; width: 78.2955px;" data-sheets-value='{"1":2,"2":"700003"}' data-sheets-numberformat='{"1":1}' data-sheets-formula='="700003"'>700003</td>
<td style="text-align: right; width: 77.983px;" data-sheets-value='{"1":3,"3":9.63}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[0]C[1]*R[0]C[2]/1000000000">₩9.6B</td>
</tr>
<tr>
<td style="width: 317.216px;" data-sheets-value='{"1":2,"2":"TIMEFOLIO TIMEFOLIO BBIG Active ETF"}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}' data-sheets-formula='=googlefinance(R[0]C[2], "name")'>TIMEFOLIO TIMEFOLIO BBIG Active ETF</td>
<td style="text-align: right; width: 78.2955px;" data-sheets-value='{"1":2,"2":"385710"}' data-sheets-numberformat='{"1":1}' data-sheets-formula='="385710"'>385710</td>
<td style="text-align: right; width: 77.983px;" data-sheets-value='{"1":3,"3":22.231}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[0]C[1]*R[0]C[2]/1000000000">₩22.2B</td>
</tr>
<tr>
<td style="width: 317.216px;" data-sheets-value='{"1":2,"2":" - Total"}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}'><strong>- Total</strong></td>
<td style="text-align: right; width: 78.2955px;" data-sheets-value='{"1":2,"2":"-"}' data-sheets-numberformat='{"1":1}'><strong>-</strong></td>
<td style="text-align: right; width: 77.983px;" data-sheets-value='{"1":3,"3":529.213}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=sum(R[-3]C[0]:R[-1]C[0])"><strong>₩529.2B</strong></td>
</tr>
<tr>
<td style="width: 317.216px;" data-sheets-value='{"1":2,"2":"Mirae TIGER KRX Secondary Battery K-New Deal ETF"}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}' data-sheets-formula='=googlefinance(R[0]C[2], "name")'>Mirae TIGER KRX Secondary Battery K-New Deal ETF</td>
<td style="width: 189.531px;" data-sheets-value='{"1":2,"2":"KRX Secondary Battery K-New Deal Index"}' data-sheets-numberformat='{"1":1}'><strong>KRX Secondary Battery K-New Deal Index</strong></td>
<td style="text-align: right; width: 78.2955px;" data-sheets-value='{"1":2,"2":"364980"}' data-sheets-numberformat='{"1":1}' data-sheets-formula='="364980"'>364980</td>
<td style="text-align: right; width: 77.983px;" data-sheets-value='{"1":3,"3":812.80425}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[0]C[1]*R[0]C[2]/1000000000"><strong>₩812.8B</strong></td>
</tr>
<tr>
<td style="width: 317.216px;" data-sheets-value='{"1":2,"2":"Mirae Asset TIGER KRX BIO K-New Deal ETF"}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}' data-sheets-formula='=googlefinance(R[0]C[2], "name")'>Mirae Asset TIGER KRX BIO K-New Deal ETF</td>
<td style="width: 189.531px;" data-sheets-value='{"1":2,"2":"KRX Bio K-New Deal Index"}' data-sheets-numberformat='{"1":1}'><strong>KRX Bio K-New Deal Index</strong></td>
<td style="text-align: right; width: 78.2955px;" data-sheets-value='{"1":2,"2":"364970"}' data-sheets-numberformat='{"1":1}' data-sheets-formula='="364970"'>364970</td>
<td style="text-align: right; width: 77.983px;" data-sheets-value='{"1":3,"3":85.51125}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[0]C[1]*R[0]C[2]/1000000000"><strong>₩85.5B</strong></td>
</tr>
<tr>
<td style="width: 317.216px;" data-sheets-value='{"1":2,"2":"Mirae Asset KRX TIGER Internet K-New Deal ETF"}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}' data-sheets-formula='=googlefinance(R[0]C[2], "name")'>Mirae Asset KRX TIGER Internet K-New Deal ETF</td>
<td style="width: 189.531px;" data-sheets-value='{"1":2,"2":"KRX Internet K-New Deal Index"}' data-sheets-numberformat='{"1":1}'><strong>KRX Internet K-New Deal Index</strong></td>
<td style="text-align: right; width: 78.2955px;" data-sheets-value='{"1":2,"2":"365000"}' data-sheets-numberformat='{"1":1}' data-sheets-formula='="365000"'>365000</td>
<td style="text-align: right; width: 77.983px;" data-sheets-value='{"1":3,"3":45.1605}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[0]C[1]*R[0]C[2]/1000000000"><strong>₩45.2B</strong></td>
</tr>
<tr>
<td style="width: 317.216px;" data-sheets-value='{"1":2,"2":"Mirae Asset KRX TIGER Game K-New Deal ETF"}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}' data-sheets-formula='=googlefinance(R[0]C[2], "name")'>Mirae Asset KRX TIGER Game K-New Deal ETF</td>
<td style="width: 189.531px;" data-sheets-value='{"1":2,"2":"KRX Game K-New Deal Index"}' data-sheets-numberformat='{"1":1}'><strong>KRX Game K-New Deal Index</strong></td>
<td style="text-align: right; width: 78.2955px;" data-sheets-value='{"1":2,"2":"364990"}' data-sheets-numberformat='{"1":1}' data-sheets-formula='="364990"'>364990</td>
<td style="text-align: right; width: 77.983px;" data-sheets-value='{"1":3,"3":36.208}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[0]C[1]*R[0]C[2]/1000000000"><strong>₩36.2B</strong></td>
</tr>
<tr><td colspan="4" rowspan="1" style="width: 726.008px;" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table><h2>How substantial is the flow impact?</h2><p>We have three major secondary battery ETFs, with a combined AUM of close to ₩3T.</p><table class="table table-striped">
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<tbody>
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<td data-sheets-value='{"1":2,"2":"Name"}'>Name</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Samsung KODEX Secondary Battery Industry ETF"}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>Samsung KODEX Secondary Battery Industry ETF</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Mirae Asset TIGER Secondary Cell ETF"}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>Mirae Asset TIGER Secondary Cell ETF</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Mirae TIGER KRX Secondary Battery K-New Deal ETF"}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>Mirae TIGER KRX Secondary Battery K-New Deal ETF</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Market cap"}'><strong>Market cap</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1233.609}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[-2]C[0]*R[-1]C[0]/1000000000"><strong>₩1,233.6B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":873.704}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[-2]C[0]*R[-1]C[0]/1000000000"><strong>₩873.7B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":812.80425}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[-2]C[0]*R[-1]C[0]/1000000000"><strong>₩812.8B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Underlying index"}'>Underlying index</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"FnGuide Secondary Battery Industry Index"}'>FnGuide Secondary Battery Industry Index</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"WISE Secondary Battery Theme Index"}'>WISE Secondary Battery Theme Index</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"KRX Secondary Battery K-New Deal Index"}'><div><div>KRX Secondary Battery K-New Deal Index</div></div></td>
</tr>
<tr><td colspan="4" data-sheets-value='{"1":2,"2":"Source: KRX &amp; FnGuide Index"}'>Source: KRX &amp; FnGuide Index</td></tr>
</tbody>
</table><div>
<p>These are 4 major constituents making all three indices.</p>
<table class="table table-striped">
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<col width="100">
<col width="100">
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<td data-sheets-value='{"1":2,"2":"4 major constituents making all the three indices"}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}'>4 major constituents making all three indices</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Samsung KODEX Secondary Battery Industry ETF"}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}'>Samsung KODEX Secondary Battery Industry ETF</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Mirae Asset TIGER Secondary Cell ETF"}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}'>Mirae Asset TIGER Secondary Cell ETF</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Mirae TIGER KRX Secondary Battery K-New Deal ETF"}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}'>Mirae TIGER KRX Secondary Battery K-New Deal ETF</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"SK Innovation Co Ltd"}'>SK Innovation Co Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.1713}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-7]">17.13%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.11449999999999999}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-6]">11.45%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.2641}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-5]">26.41%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Posco Chemical Co Ltd"}'><strong>Posco Chemical Co Ltd</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.165}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-7]"><strong>16.50%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.0877}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[3]C[-6]"><strong>8.77%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.0796}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[2]C[-5]"><strong>7.96%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"LG Chem Ltd"}'>LG Chem Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.1596}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-7]">15.96%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.0984}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-1]C[-6]">9.84%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.2395}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-1]C[-5]">23.95%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Samsung SDI Co Ltd"}'>Samsung SDI Co Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.1318}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-7]">13.18%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.09210000000000002}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[-6]">9.21%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.2296}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-1]C[-5]">22.96%</td>
</tr>
<tr><td colspan="4" rowspan="1" data-sheets-value='{"1":2,"2":"Source: KRX &amp; FnGuide Index"}'>Source: KRX &amp; FnGuide Index</td></tr>
</tbody>
</table>
<p>As seen below, these three ETFs spark at least as much a passive flow as the KOSPI 200 if we factor in only passive funds making rebalancing trade on the implementation day. As for Posco Chemical, the three ETFs combined passive flow is nearly 6 times KOSPI 200.</p>
<table class="table table-striped">
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<col width="100">
<col width="100">
<col width="100">
<col width="100">
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<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Name"}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}'>Name</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Three sector ETFs combined passive flow"}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}'>Three ETFs combined passive flow</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"KOSPI 200 passive flow, assuming ₩20T worth of ETFs/index funds making rebalancing trade on the implementation day"}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}'>KOSPI 200 passive flow, assuming ₩20T worth of ETFs/index funds making rebalancing trade on the implementation day</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"KOSPI 200 weight"}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}'>KOSPI 200 weight</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"SK Innovation Co Ltd"}' data-sheets-formula='=googlefinance(R[0]C[10], "name")'>SK Innovation Co Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":526.017932125}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[0]C[3]+R[0]C[5]+R[0]C[7]">₩526.0B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"₩218.0B"}'>₩218.0B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.0109}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>1.09%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Posco Chemical Co Ltd"}' data-sheets-formula='=googlefinance(R[0]C[10], "name")'><strong>Posco Chemical Co Ltd</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":344.86854409999995}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[0]C[3]+R[0]C[5]+R[0]C[7]"><strong>₩344.9B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"₩60.0B"}'><strong>₩60.0B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.003}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'><strong>0.30%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"LG Chem Ltd"}' data-sheets-formula='=googlefinance(R[0]C[10], "name")'>LG Chem Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":477.52308787499993}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[0]C[3]+R[0]C[5]+R[0]C[7]">₩477.5B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"₩580.0B"}'>₩580.0B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.029}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>2.90%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Samsung SDI Co Ltd"}' data-sheets-formula='=googlefinance(R[0]C[10], "name")'>Samsung SDI Co Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":429.67766040000004}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[0]C[3]+R[0]C[5]+R[0]C[7]">₩429.7B</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"₩490.0B"}'>₩490.0B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.0245}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>2.45%</td>
</tr>
<tr><td colspan="4" data-sheets-value='{"1":2,"2":"Source: KRX &amp; FnGuide Index"}'>Source: KRX &amp; FnGuide Index</td></tr>
</tbody>
</table>
</div>

Korea's local sector ETFs do not usually attract the spotlight as most of them are pretty insignificant in AUM. But a few sector index-mirroring ETFs are quite different. They are as hot as the flagship KOSPI 200-tracking ETFs.The secondary battery sector ETFs are these exceptions. The extreme popularity of the secondary battery sector-ETFs bodes well for the level of investor interest sitting on the sector itself.How hot are they really?
For instance, let's look at the KRX K-New Deal Index.
It has one mother index named the KRX BBIG K-New Deal Index, under which there are four sub-indices. BBIG stands for Battery, Bio, Internet, and Game, representing the four sectors that the New Deal initiative features.

The main index contains 12 large-cap stocks, three of which are from each of the four sectors. We then have four sub-indices, one for each sector. Each sub-index has 10 constituents, selected mainly based on the full market capitalization.
The mother index has three ETFs, and each of the four sub-indices has one ETF. The mother index's combined AUM stands at ₩529.2B at the last close. But the sub-index for the secondary battery has a total of ₩812.8B in AUM, substantially more than the mother index and simply incomparable to the other three sub-indices.










K-New Deal tracking ETFs
Index
Ticker
Market cap


Mirae Asset TIGER KRX BBIG K-New Deal ETF
KRX BBIG K-New Deal Index
364960
₩497.4B


Hana Financial Investment Hana KRX BBIG K-New Deal ETN 3
700003
₩9.6B


TIMEFOLIO TIMEFOLIO BBIG Active ETF
385710
₩22.2B


- Total
-
₩529.2B


Mirae TIGER KRX Secondary Battery K-New Deal ETF
KRX Secondary Battery K-New Deal Index
364980
₩812.8B


Mirae Asset TIGER KRX BIO K-New Deal ETF
KRX Bio K-New Deal Index
364970
₩85.5B


Mirae Asset KRX TIGER Internet K-New Deal ETF
KRX Internet K-New Deal Index
365000
₩45.2B


Mirae Asset KRX TIGER Game K-New Deal ETF
KRX Game K-New Deal Index
364990
₩36.2B

Source: KRX

How substantial is the flow impact?We have three major secondary battery ETFs, with a combined AUM of close to ₩3T.








Name
Samsung KODEX Secondary Battery Industry ETF
Mirae Asset TIGER Secondary Cell ETF
Mirae TIGER KRX Secondary Battery K-New Deal ETF


Market cap
₩1,233.6B
₩873.7B
₩812.8B


Underlying index
FnGuide Secondary Battery Industry Index
WISE Secondary Battery Theme Index
KRX Secondary Battery K-New Deal Index

Source: KRX &amp; FnGuide Index


These are 4 major constituents making all three indices.









4 major constituents making all three indices
Samsung KODEX Secondary Battery Industry ETF
Mirae Asset TIGER Secondary Cell ETF
Mirae TIGER KRX Secondary Battery K-New Deal ETF


SK Innovation Co Ltd
17.13%
11.45%
26.41%


Posco Chemical Co Ltd
16.50%
8.77%
7.96%


LG Chem Ltd
15.96%
9.84%
23.95%


Samsung SDI Co Ltd
13.18%
9.21%
22.96%

Source: KRX &amp; FnGuide Index


As seen below, these three ETFs spark at least as much a passive flow as the KOSPI 200 if we factor in only passive funds making rebalancing trade on the implementation day. As for Posco Chemical, the three ETFs combined passive flow is nearly 6 times KOSPI 200.









Name
Three ETFs combined passive flow
KOSPI 200 passive flow, assuming ₩20T worth of ETFs/index funds making rebalancing trade on the implementation day
KOSPI 200 weight


SK Innovation Co Ltd
₩526.0B
₩218.0B
1.09%


Posco Chemical Co Ltd
₩344.9B
₩60.0B
0.30%


LG Chem Ltd
₩477.5B
₩580.0B
2.90%


Samsung SDI Co Ltd
₩429.7B
₩490.0B
2.45%

Source: KRX &amp; FnGuide Index




Passive Flow Estimations of Two TIGER ETFs on SK IE Tech on Rebalancing Implementation Day

<p>The local secondary battery sector ETF rebalancing last Friday made a huge splash on several secondary battery sector big names, including LG Chem. The ETF appeared to have increased LG Chem's index weighting, resulting in a sharp increase in the ordinary share price during the simultaneous buy and buy period 10 minutes before the close last Friday. During this 10-minute period, LG Chem surged from 2.97% to 5.33%.<span> As a result, we now have a substantial disparity in LG Chem 1P vs. Ordinary.</span></p><hr><h2>Sigma on a 20D MA</h2><p>LG Chem 1P vs. Ordinary is at -1.92σ on a 20-day moving average. This is the widest diversion since April 16, when the sigma fell to -1.93.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/212/689/original/LG+Chem+1P+vs.+Ordinary+-+Sigma+on+a+20D+MA.png?1623517910" class="editor-image img-responsive" data-smartkarma-image-id="212689"></figure></section><h2>Pref discount</h2><p>LG Chem 1P's discount to the ordinary share now sits at 55.41%, 2.83%p up from the 180-day mean and a 7.92%p increase from the 180-day low.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/212/690/original/LG+Chem+1P+vs.+Ordinary+-+Pref+discount.png?1623517934" class="editor-image img-responsive" data-smartkarma-image-id="212690"></figure></section><table class="table table-striped">
<colgroup>
<col width="70">
<col width="70">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"LG Chem Ltd Preference Shares"}' data-sheets-formula="=R[-52]C[0]">LG Chem Ltd Preference Shares</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Current discount"}'><strong>Current discount</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.5541176470588236}' data-sheets-formula='=indirect("$E"&amp;R70C[0])'><strong>55.41%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Δ to 180-day mean"}'><strong>Δ to 180-day mean</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.02826786648363444}' data-sheets-formula='=indirect("$B"&amp;R70C[0])'><strong>2.83%p</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Δ to 180-day low"}'>Δ to 180-day low</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.07923920297454479}' data-sheets-formula='=indirect("$C"&amp;R70C[0])'>7.92%p</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Δ to 180-day high"}'>Δ to 180-day high</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-0.013687735963950676}' data-sheets-formula='=indirect("$D"&amp;R70C[0])'>-1.37%p</td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table>

The local secondary battery sector ETF rebalancing last Friday made a huge splash on several secondary battery sector big names, including LG Chem. The ETF appeared to have increased LG Chem's index weighting, resulting in a sharp increase in the ordinary share price during the simultaneous buy and buy period 10 minutes before the close last Friday. During this 10-minute period, LG Chem surged from 2.97% to 5.33%. As a result, we now have a substantial disparity in LG Chem 1P vs. Ordinary.Sigma on a 20D MALG Chem 1P vs. Ordinary is at -1.92σ on a 20-day moving average. This is the widest diversion since April 16, when the sigma fell to -1.93.Pref discountLG Chem 1P's discount to the ordinary share now sits at 55.41%, 2.83%p up from the 180-day mean and a 7.92%p increase from the 180-day low.





LG Chem Ltd Preference Shares

Current discount
55.41%


Δ to 180-day mean
2.83%p


Δ to 180-day low
7.92%p


Δ to 180-day high
-1.37%p

Source: KRX



LG Chem Pref Arb Trade: Capitalize on a Disparity Resulting from Index Rebalancing

Founder/CEO of ROK Advisory, ROK Advisory LLC

Ken S. Kim

Founder/CEO of ROK Advisory

ROK Advisory LLC

ROK is an independent research advisory firm. We guide you to minimize the information gap between foreign and local investors in Northeast Asia with a focus in Korea, Taiwan and Japan.

Independent Research Advisory Firm

Thematic (Sector/Industry)

<p>Does holding company ("holdco") discount in Korea apply to the likes of <a href="https://www.smartkarma.com/entities/sk-telecom-co-ltd-bbccd86c-474d-4a4d-946d-10e911a225a2" target="_blank" data-smartkarma-citation="entities:395:1" rel="noopener">SK Telecom (017670 KS)</a> , <a href="https://www.smartkarma.com/entities/sk-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:393:1" rel="noopener">SK Holdings (034730 KS)</a> (now Inc), <a href="https://www.smartkarma.com/entities/osstem-implant-co-ltd" target="_blank" data-smartkarma-citation="entities:1450:1" rel="noopener">Osstem Implant (048260 KS)</a> , <a href="https://www.smartkarma.com/entities/lg-chem-ltd" target="_blank" data-smartkarma-citation="entities:3583:1" rel="noopener">LG Chem Ltd (051910 KS)</a> , <a href="https://www.smartkarma.com/entities/kakao-corp" target="_blank" data-smartkarma-citation="entities:15002:1" rel="noopener">Kakao Corp (035720 KS)</a> , <a href="https://www.smartkarma.com/entities/fila-holdings-corp" target="_blank" data-smartkarma-citation="entities:10699:1" rel="noopener">Fila Holdings (081660 KS)</a> and others? To answer that question I think we need to know the history of the holdco in Korea.</p>

Does holding company ("holdco") discount in Korea apply to the likes of SK Telecom (017670 KS) , SK Holdings (034730 KS) (now Inc), Osstem Implant (048260 KS) , LG Chem Ltd (051910 KS) , Kakao Corp (035720 KS) , Fila Holdings (081660 KS) and others? To answer that question I think we need to know the history of the holdco in Korea.

The Holding Company Dilemma in Korea -  What's the Right Discount?

SK IE Technology and LG Chem soared abruptly between 3:20 and 3:30 pm during the simultaneous bids and offers trade period. During this 10-minute period, SK IE Technology's daily gain rose from 3.51% to 10.53%. LG Chem also rose sharply from 2.97% to 5.33%.Why did this happen?The local street believes that the stock prices have moved significantly in such a short period of time as Samsung Asset Management newly added SK IE Technology to its secondary battery sector ETF and increased the weighting of LG Chem in the same ETF.Local ETFs tracking secondary battery sectorKorea currently has three ETFs specifically tracking the local secondary battery sector. The biggest one is Samsung KODEX Secondary Battery Industry ETF, mirroring the FnGuide Secondary Battery Industry Index. It now features a market cap of ₩1,233.6B with 26 constituents.The other two ETFs aren't too far behind by market cap. They are both Mirae Asset TIGER ETFs. One tracks the WISE Secondary Battery Them Index containing 26 constituents. The other one mirrors the government-initiated K-New Deal Index, which has 10 constituents.







Local secondary battery sector ETFs

Name
Samsung KODEX Secondary Battery Industry ETF
Mirae Asset TIGER Secondary Cell ETF
Mirae TIGER KRX Secondary Battery K-New Deal ETF


Ticker
305720
305540
364980


Manager
Samsung Asset Management
Mirae Asset Management
Mirae Asset Management


Market cap
₩1,233.6B
₩873.7B
₩812.8B


Underlying index
FnGuide Secondary Battery Industry Index
WISE Secondary Battery Theme Index
KRX Secondary Battery K-New Deal Index


Constituents
25
26
10

Source: KRX &amp; FnGuide Index

Portfolio Deposit File (PDF)Below is the full list of the constituents of the three ETFs with index weight as of last Friday. It seems that Samsung KODEX hasn't fully updated the constituent list of its Secondary Battery Sector Index ETF. It is presumably because most of the trades took place during the simultaneous bids and offers trade period, meaning that the trades were completed and reflected after 3:30 pm. Samsung KODEX updates the portfolio deposit file (PDF) of its ETFs at 3:30 pm of each day.










Samsung KODEX Secondary Battery Industry ETF
Weight
Mirae Asset TIGER Secondary Cell ETF
Weight
Mirae TIGER KRX Secondary Battery K-New Deal ETF
Weight


SK Innovation
17.13%
SK Innovation
11.45%
SK Innovation
26.41%


Posco Chemical
16.50%
LG Chem
9.84%
LG Chem
23.95%


LG Chem
15.96%
SKC
9.66%
Samsung SDI
22.96%


Samsung SDI
13.18%
Samsung SDI
9.21%
Posco Chemical
7.96%


Ecopro
8.35%
Posco Chemical
8.77%
SKC Co
5.22%


Ecopro HN
5.33%
Ecopro BM
6.92%
Ecopro BM
3.64%


L&amp;F
4.00%
L&amp;F
6.33%
L&amp;F
2.85%


Ecopro BM
3.94%
Iljin Materials
6.12%
Iljin Materials
2.73%


Iljin Materials
3.59%
SoulBrain
5.90%
SoulBrain
2.71%


Creative &amp; Innovative System
3.05%
Chunbo
3.14%
Chunbo
1.51%


People &amp; Technology
1.72%
Ecopro Co., Ltd.
3.06%




Foosung
1.02%
Creative &amp; Innovative System
2.49%




Cosmo Advanced Materials&amp;Technlgy
1.00%
Cosmo Advanced Materials&amp;Technlgy
2.24%




DA Technology
0.88%
Foosung
2.07%




Sang-A Frontec
0.88%
Ecopro HN
2.02%




Daejoo Electronic Materials
0.69%
Solus Advanced Materials
2.01%




Cosmo Chemical
0.42%
Daejoo Electronic Materials
1.89%




Wonik PNE
0.38%
People &amp; Technology
1.68%




mPlus
0.38%
Dongwha Enterprise
0.92%




Soulbrain Holdings
0.33%
Wonik PNE
0.91%




Philoptics
0.28%
Youlchon Chemical
0.80%




Sangsin Energy Display Precision
0.27%
CowinTech
0.71%




Shin Heung Energy &amp; Electronics
0.27%
Shin Heung Energy &amp; Electronics
0.55%




Chemtros
0.24%
mPlus
0.51%




NS
0.21%
Innometry
0.41%






Daebo Magnetic
0.27%



Source: Samsung KODEX &amp; Mirae Asset TIGER



Korea's Local Sector Index (FnGuide Secondary Battery) Rebalancing Made a Big Splash Last Friday

South Korea

LG Chem Ltd. is a chemical manufacturer.  The Company's products include petrochemicals, plastic resins, and engineering plastics.  LG Chem also produces industrial and electronic materials.

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LG Chem Ltd (051910 KS)

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