Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Event-Driven

<p>LG Chem's regulatory filing about the divestiture came out this morning.</p><p>As reported yesterday, it is a spinout (physical division) of the EV battery unit. So, the surviving entity, LG Chem, will wholly-own the spun-out entity, tentatively named LG Energy Solution.</p><p>It requires shareholder approval but doesn't grant appraisal rights.</p><table class="table table-striped">
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<tbody>
<tr><td colspan="4" rowspan="1" data-sheets-value='{"1":2,"2":"Overview"}'>Overview</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Name"}'>Name</td>
<td colspan="3" rowspan="1" style="text-align: right;" data-sheets-value='{"1":2,"2":"LG Chem Ltd"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>LG Chem Ltd</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ticker"}'>Ticker</td>
<td colspan="3" rowspan="1" style="text-align: right;" data-sheets-value='{"1":2,"2":"051910"}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula='="051910"'>051910</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Surviving"}'><strong>Surviving</strong></td>
<td colspan="3" rowspan="1" style="text-align: right;" data-sheets-value='{"1":2,"2":"LG Chem Ltd"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'><strong>LG Chem Ltd</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Ticker"}'>- Ticker</td>
<td colspan="3" rowspan="1" style="text-align: right;" data-sheets-value='{"1":2,"2":"051910"}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-2]C[0]">051910</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Bourse"}'>- Bourse</td>
<td colspan="3" rowspan="1" style="text-align: right;" data-sheets-value='{"1":2,"2":"KOSPI"}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>KOSPI</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Ratio"}'>- Ratio</td>
<td colspan="3" rowspan="1" style="text-align: right;" data-sheets-value='{"1":2,"2":"N/A"}'>N/A</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Type"}'>- Type</td>
<td colspan="3" rowspan="1" style="text-align: right;" data-sheets-value='{"1":2,"2":"Operating company"}'>Operating company</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Business"}'>- Business</td>
<td colspan="3" rowspan="1" style="text-align: right;" data-sheets-value='{"1":2,"2":"Petrochemical, advanced material, &amp; bio"}'>Petrochemical, advanced material, &amp; bio</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Stock split"}'>- Stock split</td>
<td colspan="3" rowspan="1" style="text-align: right;" data-sheets-value='{"1":3,"3":1}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'>1.0</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"New"}'><strong>New</strong></td>
<td colspan="3" rowspan="1" style="text-align: right;" data-sheets-value='{"1":2,"2":"LG Energy Solution"}'><strong>LG Energy Solution</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Type"}'>- Divestiture</td>
<td colspan="3" rowspan="1" style="text-align: right;" data-sheets-value='{"1":2,"2":"Spin-out (physical division)"}'>Spin-out (physical division)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Ticker"}'>- Ticker</td>
<td colspan="3" rowspan="1" style="text-align: right;" data-sheets-value='{"1":2,"2":"N/A"}'>N/A</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Bourse"}'>- Bourse</td>
<td colspan="3" rowspan="1" style="text-align: right;" data-sheets-value='{"1":2,"2":"Unlisted (wholly-owned)"}'>Unlisted (wholly-owned)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Ratio"}'>- Ratio</td>
<td colspan="3" rowspan="1" style="text-align: right;" data-sheets-value='{"1":2,"2":"N/A"}'>N/A</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Type"}'>- Type</td>
<td colspan="3" rowspan="1" style="text-align: right;" data-sheets-value='{"1":2,"2":"Operating company"}'>Operating company</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Business"}'>- Business</td>
<td colspan="3" rowspan="1" style="text-align: right;" data-sheets-value='{"1":2,"2":"Bettery solution"}'>Battery solution</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Stock split"}'>- Stock split</td>
<td colspan="3" rowspan="1" style="text-align: right;" data-sheets-value='{"1":3,"3":1}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'>1.0</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stock purchase"}'>Stock purchase</td>
<td colspan="3" rowspan="1" style="text-align: right;" data-sheets-value='{"1":2,"2":"N/A"}' data-sheets-numberformat='{"1":2,"2":"#,##0.0000000","3":1}'>N/A</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Banker"}'>Banker</td>
<td colspan="3" rowspan="1" style="text-align: right;" data-sheets-value='{"1":2,"2":"N/A"}' data-sheets-numberformat='{"1":2,"2":"#,##0.0000000","3":1}'>N/A</td>
</tr>
<tr><td colspan="4" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><em>Source: DART</em></td></tr>
</tbody>
</table><p>The company scheduled the general meeting for October 30. The effective date of the divestiture is December 1.</p><table class="table table-striped">
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<col width="300">
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<col width="200">
<col width="200">
</colgroup>
<tbody>
<tr><td colspan="4" rowspan="1" data-sheets-value='{"1":2,"2":"Timetable"}' data-sheets-note="Sang Hyun Park: We have to buy shares until BOD+1 and hold onto them until the day immediately before the ex-rights date to be eligible to receive stock purchase rights. We then have to notify our dissenting opinion until the end of dissenting opinion notice period.">Timetable</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"BOD meeting"}'>BOD meeting</td>
<td colspan="3" rowspan="1" style="text-align: right;" data-sheets-value='{"1":3,"3":44091}' data-sheets-numberformat='{"1":5,"2":"[$-1009]mmmm\\ d\\,\\ yyyy","3":1}'>September 17, 2020</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Shareholder approval at EGM"}'>Shareholder approval at EGM</td>
<td colspan="3" rowspan="1" style="text-align: right;" data-sheets-value='{"1":3,"3":44134}' data-sheets-numberformat='{"1":5,"2":"[$-1009]mmmm\\ d\\,\\ yyyy","3":1}'>October 30, 2020</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Trade suspension begins"}'>Trade suspension begins</td>
<td colspan="3" rowspan="1" style="text-align: right;" data-sheets-value='{"1":2,"2":"N/A"}'>N/A</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Trade suspension ends"}'>Trade suspension ends</td>
<td colspan="3" rowspan="1" style="text-align: right;" data-sheets-value='{"1":2,"2":"N/A"}'>N/A</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Effective date"}'>Effective date</td>
<td colspan="3" rowspan="1" style="text-align: right;" data-sheets-value='{"1":3,"3":44166}' data-sheets-numberformat='{"1":5,"2":"[$-1009]mmmm\\ d\\,\\ yyyy","3":1}'>December 1, 2020</td>
</tr>
<tr><td colspan="4" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'><em>Source: DART</em></td></tr>
</tbody>
</table><p>The new entity, LG Energy Solution, will carry equity of ₩6tril with a D/E ratio of 72.2%.</p><table class="table table-striped">
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<col width="300">
<col width="200">
<col width="200">
<col width="200">
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<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Financials - 2Q20(₩B)"}'>Financials - 2Q20(₩B)</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Surviving"}' data-sheets-formula="=R[-58]C[-1]">Surviving</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"New"}' data-sheets-formula="=R[-51]C[-2]">New</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Note"}'>Note</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Name"}'>Name</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"LG Chem Ltd"}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}' data-sheets-formula="=R[-59]C[0]">LG Chem Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"LG Energy Solution"}' data-sheets-formula="=R[-52]C[-1]"><strong>LG Energy Solution</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Tentative"}'>Tentative</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Split type"}'>Split type</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'>-</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Spin-out (physical division)"}' data-sheets-formula="=R[-52]C[-1]"><strong>Spin-out</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Wholly-owned subsidiary"}'>Wholly-owned subsidiary</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Total assets"}'>Total assets</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":24727.505710317}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'>24,727.5</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":10255.222921326}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'><strong>10,255.2</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"As of June 30, 2020"}'>As of June 30, 2020</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Total liabilities"}'>Total liabilities</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":7912.704159275}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'>7,912.7</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4297.06857645}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'><strong>4,297.1</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"As of June 30, 2020"}'>As of June 30, 2020</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Total equity"}'>Total equity</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":16814.801551042}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'>16,814.8</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":5958.154344876}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'><strong>5,958.2</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"As of June 30, 2020"}'>As of June 30, 2020</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Capital"}'>- Capital</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":391.405715}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'>391.4</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":100}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'><strong>100.0</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"As of June 30, 2020"}'>As of June 30, 2020</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Split ratio"}'>Split ratio</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"N/A"}' data-sheets-numberformat='{"1":3,"2":"0.00000%"}' data-sheets-formula="=R[-62]C[0]">N/A</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"N/A"}' data-sheets-formula="=R[-54]C[-1]"><strong>N/A</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Physical division"}'>Physical division</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"FY19 de-consolidated sales"}'>FY19 de-consolidated sales</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":15617.248169816}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'>15,617.2</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":6695.312485423}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'><strong>6,695.3</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"FY2019"}'>FY2019</td>
</tr>
<tr><td colspan="4" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><em>Source: DART</em></td></tr>
</tbody>
</table><table class="table table-striped">
<colgroup>
<col width="300">
<col width="200">
<col width="200">
<col width="200">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Shareholding"}'>Shareholding</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Common"}'>Common</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"1P"}'>1P</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Total"}'>Total</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"LG Corp"}' data-sheets-formula='=googlefinance(R[0]C[6], "name")'>LG Corp</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.33338192217249396}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[3]/R38C[3]">33.34%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[3]/R38C[3]">0.00%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.3006370384755368}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(R[0]C[1]+R[0]C[2])/(R38C5+R38C6)">30.06%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"LG Yeonam Cultural Foundation"}'>LG Yeonam Cultural Foundation</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.0002938845647891302}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[3]/R38C[3]">0.03%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[3]/R38C[3]">0.00%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.0002650191247207517}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(R[0]C[1]+R[0]C[2])/(R38C5+R38C6)">0.03%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Special affiliated persons"}'>Special affiliated persons</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.000008542002919495108}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[3]/R38C[3]">0.00%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.000026011861408802414}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[3]/R38C[3]">0.00%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.000010257898252712022}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(R[0]C[1]+R[0]C[2])/(R38C5+R38C6)">0.00%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Major shareholder"}'>- Major shareholder</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.3336843487402026}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[3]/R38C[3]">33.37%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.000026011861408802414}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[3]/R38C[3]">0.00%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.3009123154985103}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(R[0]C[1]+R[0]C[2])/(R38C5+R38C6)">30.09%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Korea NPS"}'>Korea NPS</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.10907588093513201}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[3]/R38C[3]">10.91%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[3]/R38C[3]">0.00%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.09836241149417044}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(R[0]C[1]+R[0]C[2])/(R38C5+R38C6)">9.84%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Treasury shares"}'>Treasury shares</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.023407878670353807}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[3]/R38C[3]">2.34%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.0021286806783893455}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[3]/R38C[3]">0.21%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.0213178287394194}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(R[0]C[1]+R[0]C[2])/(R38C5+R38C6)">2.13%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Total"}'>Total</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[3]/R38C[3]">100.00%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[0]C[3]/R38C[3]">100.00%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(R[0]C[1]+R[0]C[2])/(R38C5+R38C6)">100.00%</td>
</tr>
<tr><td colspan="4" rowspan="1" data-sheets-value='{"1":2,"2":"Source: FnGuide"}'><em>Source: FnGuide</em></td></tr>
</tbody>
</table>

LG Chem's regulatory filing about the divestiture came out this morning.As reported yesterday, it is a spinout (physical division) of the EV battery unit. So, the surviving entity, LG Chem, will wholly-own the spun-out entity, tentatively named LG Energy Solution.It requires shareholder approval but doesn't grant appraisal rights.







Overview

Name
LG Chem Ltd


Ticker
051910


Surviving
LG Chem Ltd


- Ticker
051910


- Bourse
KOSPI


- Ratio
N/A


- Type
Operating company


- Business
Petrochemical, advanced material, &amp; bio


- Stock split
1.0


New
LG Energy Solution


- Divestiture
Spin-out (physical division)


- Ticker
N/A


- Bourse
Unlisted (wholly-owned)


- Ratio
N/A


- Type
Operating company


- Business
Battery solution


- Stock split
1.0


Stock purchase
N/A


Banker
N/A

Source: DART

The company scheduled the general meeting for October 30. The effective date of the divestiture is December 1.







Timetable

BOD meeting
September 17, 2020


Shareholder approval at EGM
October 30, 2020


Trade suspension begins
N/A


Trade suspension ends
N/A


Effective date
December 1, 2020

Source: DART

The new entity, LG Energy Solution, will carry equity of ₩6tril with a D/E ratio of 72.2%.








Financials - 2Q20(₩B)
Surviving
New
Note


Name
LG Chem Ltd
LG Energy Solution
Tentative


Split type
-
Spin-out
Wholly-owned subsidiary


Total assets
24,727.5
10,255.2
As of June 30, 2020


Total liabilities
7,912.7
4,297.1
As of June 30, 2020


Total equity
16,814.8
5,958.2
As of June 30, 2020


- Capital
391.4
100.0
As of June 30, 2020


Split ratio
N/A
N/A
Physical division


FY19 de-consolidated sales
15,617.2
6,695.3
FY2019

Source: DART










Shareholding
Common
1P
Total


LG Corp
33.34%
0.00%
30.06%


LG Yeonam Cultural Foundation
0.03%
0.00%
0.03%


Special affiliated persons
0.00%
0.00%
0.00%


- Major shareholder
33.37%
0.00%
30.09%


Korea NPS
10.91%
0.00%
9.84%


Treasury shares
2.34%
0.21%
2.13%


Total
100.00%
100.00%
100.00%

Source: FnGuide



LG Chem: Spinout, Likely ECO Later, & 1P Diversion, Caused by Irrational Sentiment

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Cross Asset Strategy

<div class="content-highlight"><p><strong>It has been reported in the past few days that <a href="http://www.koreaninvestors.com/?p=12175" target="_blank" rel="noopener">NPS</a> is likely to put a greater emphasis on ESG (environmental, social, &amp; governance) based investing for Korean stocks and bonds starting 2021. </strong>NPS has currently given a mandate to a company to help NPS to apply ESG based investment system. The ESG evaluations are expected to aid NPS to actively exercise shareholder rights and also to carry out negative screening of stocks.</p></div><h3>Implications of NPS Incorporating More ESG Criteria on Domestic Investments (Bonds &amp; Stocks)</h3><ul>
<li>Negative Impact on VICE industries </li>
<li>Positive Impact on Renewable Energy Industries</li>
<li>Negative Impact on Coal &amp; Oil Industries</li>
<li>Greater Representation of Women in Senior Management Team/BOD</li>
</ul>

It has been reported in the past few days that NPS is likely to put a greater emphasis on ESG (environmental, social, &amp; governance) based investing for Korean stocks and bonds starting 2021. NPS has currently given a mandate to a company to help NPS to apply ESG based investment system. The ESG evaluations are expected to aid NPS to actively exercise shareholder rights and also to carry out negative screening of stocks.Implications of NPS Incorporating More ESG Criteria on Domestic Investments (Bonds &amp; Stocks)
Negative Impact on VICE industries 
Positive Impact on Renewable Energy Industries
Negative Impact on Coal &amp; Oil Industries
Greater Representation of Women in Senior Management Team/BOD


NPS - Greater Emphasis of ESG Based Investing for Korean Stocks & Bonds Starting 2021

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

<div><p>The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.</p></div><div><p>Hong Kong saw shorts rise on <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>, <a href="https://www.smartkarma.com/entities/ping-an-healthcare-and-technology-company-limited" target="_blank" data-smartkarma-citation="entities:27008:1" rel="noopener">Ping An Healthcare and Technology Company Limited (1833 HK)</a>, <a href="https://www.smartkarma.com/entities/semiconductor-manufacturing" target="_blank" data-smartkarma-citation="entities:14231:1" rel="noopener">Semiconductor Manufacturing (981 HK)</a> and <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan Dianping (3690 HK)</a>, while there was short covering on <a href="https://www.smartkarma.com/entities/shenzhou-intl-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10415:1" rel="noopener">Shenzhou Intl Group Holdings (2313 HK)</a>, <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a>, <a href="https://www.smartkarma.com/entities/kingdee-international-sftwr" target="_blank" data-smartkarma-citation="entities:37:1" rel="noopener">Kingdee International Software (268 HK)</a> and <a href="https://www.smartkarma.com/entities/galaxy-entertainment-group-limited" target="_blank" data-smartkarma-citation="entities:806:1" rel="noopener">Galaxy Entertainment Group (27 HK)</a>. Shorts increased in all sectors led by Communication Services, Health Care, Financials, Consumer Staples and Consumer Discretionary.</p></div><div><p>Japan saw an increase in shorts on <a href="https://www.smartkarma.com/entities/kao-corp" target="_blank" data-smartkarma-citation="entities:12933:1" rel="noopener">Kao Corp (4452 JP)</a>, <a href="https://www.smartkarma.com/entities/canon-inc" target="_blank" data-smartkarma-citation="entities:1:1" rel="noopener">Canon Inc (7751 JP)</a>, <a href="https://www.smartkarma.com/entities/trend-micro-inc" target="_blank" data-smartkarma-citation="entities:13172:1" rel="noopener">Trend Micro Inc (4704 JP)</a> and <a href="https://www.smartkarma.com/entities/kyowa-hakko-kirin-co-ltd" target="_blank" data-smartkarma-citation="entities:18055:1" rel="noopener">Kyowa Hakko Kirin (4151 JP)</a> and a reduction in shorts on <a href="https://www.smartkarma.com/entities/mitsubishi-electric-corp" target="_blank" data-smartkarma-citation="entities:11171:1" rel="noopener">Mitsubishi Electric (6503 JP)</a>, <a href="https://www.smartkarma.com/entities/sumitomo-corp" target="_blank" data-smartkarma-citation="entities:5380:1" rel="noopener">Sumitomo Corp (8053 JP)</a>, <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a> and <a href="https://www.smartkarma.com/entities/tokyo-gas-co-ltd" target="_blank" data-smartkarma-citation="entities:2332:1" rel="noopener">Tokyo Gas (9531 JP)</a>. Sectorally, shorts increased on Communication Services, Consumer Staples, Consumer Discretionary and Health Care and were covered in Industrials and Utilities.</p></div><div><p>Short Interest in Korea decreased in almost all sectors led by Technology Hardware, Materials and Capital Goods. Stocks that saw the most short covering were <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>, <a href="https://www.smartkarma.com/entities/helixmith-co-ltd" target="_blank" data-smartkarma-citation="entities:7636:1" rel="noopener">Helixmith (084990 KS)</a>, <a href="https://www.smartkarma.com/entities/kmw-co-ltd" target="_blank" data-smartkarma-citation="entities:2834:1" rel="noopener">KMW Co Ltd (032500 KS)</a> and <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> while shorts increased on <a href="https://www.smartkarma.com/entities/samsung-biologics-co-ltd" target="_blank" data-smartkarma-citation="entities:22932:1" rel="noopener">Samsung Biologics Co., (207940 KS)</a> and <a href="https://www.smartkarma.com/entities/alteogen-inc" target="_blank" data-smartkarma-citation="entities:15886:1" rel="noopener">Alteogen Inc (196170 KS)</a>.</p></div><div><p>Short Interest in Taiwan increased in almost all sectors led by Technology Hardware, Semiconductors, Capital Goods and Banks. Stocks that saw the highest increase in shorts were <a href="https://www.smartkarma.com/entities/genius-electronic-optical-co-ltd" target="_blank" data-smartkarma-citation="entities:9632:1" rel="noopener">Genius Electronic Optical (3406 TT)</a>, <a href="https://www.smartkarma.com/entities/largan-precision-co-ltd" target="_blank" data-smartkarma-citation="entities:9126:1" rel="noopener">Largan Precision (3008 TT)</a>, <a href="https://www.smartkarma.com/entities/mega-financial-holding-co-ltd" target="_blank" data-smartkarma-citation="entities:3463:1" rel="noopener">Mega Financial Holding Co., (2886 TT)</a> and <a href="https://www.smartkarma.com/entities/alchip-technologies-ltd" target="_blank" data-smartkarma-citation="entities:20219:1" rel="noopener">Alchip Technologies (3661 TT)</a> while shorts were covered on <a href="https://www.smartkarma.com/entities/yageo-corporation" target="_blank" data-smartkarma-citation="entities:13212:1" rel="noopener">Yageo Corporation (2327 TT)</a>, <a href="https://www.smartkarma.com/entities/realtek-semiconductor-corp" target="_blank" data-smartkarma-citation="entities:7326:1" rel="noopener">Realtek Semiconductor (2379 TT)</a>, <a href="https://www.smartkarma.com/entities/novatek-microelectronics-corp" target="_blank" data-smartkarma-citation="entities:10904:1" rel="noopener">Novatek Microelectronics Corp (3034 TT)</a> and <a href="https://www.smartkarma.com/entities/nanya-technology-corp" target="_blank" data-smartkarma-citation="entities:3269:1" rel="noopener">Nanya Technology (2408 TT)</a>. </p></div>

The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.Hong Kong saw shorts rise on Tencent Holdings (700 HK), Ping An Healthcare and Technology Company Limited (1833 HK), Semiconductor Manufacturing (981 HK) and Meituan Dianping (3690 HK), while there was short covering on Shenzhou Intl Group Holdings (2313 HK), Xiaomi Corp (1810 HK), Kingdee International Software (268 HK) and Galaxy Entertainment Group (27 HK). Shorts increased in all sectors led by Communication Services, Health Care, Financials, Consumer Staples and Consumer Discretionary.Japan saw an increase in shorts on Kao Corp (4452 JP), Canon Inc (7751 JP), Trend Micro Inc (4704 JP) and Kyowa Hakko Kirin (4151 JP) and a reduction in shorts on Mitsubishi Electric (6503 JP), Sumitomo Corp (8053 JP), Toshiba Corp (6502 JP) and Tokyo Gas (9531 JP). Sectorally, shorts increased on Communication Services, Consumer Staples, Consumer Discretionary and Health Care and were covered in Industrials and Utilities.Short Interest in Korea decreased in almost all sectors led by Technology Hardware, Materials and Capital Goods. Stocks that saw the most short covering were Samsung Electronics (005930 KS), Helixmith (084990 KS), KMW Co Ltd (032500 KS) and LG Chem Ltd (051910 KS) while shorts increased on Samsung Biologics Co., (207940 KS) and Alteogen Inc (196170 KS).Short Interest in Taiwan increased in almost all sectors led by Technology Hardware, Semiconductors, Capital Goods and Banks. Stocks that saw the highest increase in shorts were Genius Electronic Optical (3406 TT), Largan Precision (3008 TT), Mega Financial Holding Co., (2886 TT) and Alchip Technologies (3661 TT) while shorts were covered on Yageo Corporation (2327 TT), Realtek Semiconductor (2379 TT), Novatek Microelectronics Corp (3034 TT) and Nanya Technology (2408 TT). 

Asia Short Interest Weekly: Tencent, SMIC, Meituan, Galaxy, Kao, Sumitomo, Alteogen, Genius, Largan

<p>The Korean government unveiled the specifics of the Korean version of the New Deal initiative.</p><p>First, we will have a government-backed ₩20tril (US$17bil) fund, ₩3tril of which will come directly from the government (tax money) with an additional ₩4tril from state-run financial institutions. The remaining ₩13tril will come from the private sector and the public.</p><p>Now, what's noteworthy is that we will see a set of new indices (designed by the KRX) specifically tracking the companies directly related to the New Deal Initiative.</p>

The Korean government unveiled the specifics of the Korean version of the New Deal initiative.First, we will have a government-backed ₩20tril (US$17bil) fund, ₩3tril of which will come directly from the government (tax money) with an additional ₩4tril from state-run financial institutions. The remaining ₩13tril will come from the private sector and the public.Now, what's noteworthy is that we will see a set of new indices (designed by the KRX) specifically tracking the companies directly related to the New Deal Initiative.

Korea-New Deal Index: Constituents, Weights, & Market Reaction

Independent Asian Credit Research, Bondcritic

Warut Promboon

Independent Asian Credit Research

Asian Fixed Income/Frontier Market Research

Bondcritic

Bondcritic, established in 2009, is designed to be an independent credit research voice that helps investors gain insights and unbiased analyses on Asian fixed income market. Our mission is to discover deep-value Asian high-yield and distressed bonds with a bottom-up approach, together with the help of our proprietary ESG (Environmental, Social Development, and Governance) model. At the same time, we focus on bringing investment cases of unrated and unloved issuers to the general public.

Thematic (Sector/Industry)

<p style="text-align: justify;">In this Smartkarma Original, we seek to study how diversity and incentives influence stock performance and profitability. We tallied diversity and incentive data related to the board of directors, management, and employees across major economies in Asia and picked top 10 companies of each country in terms of market capitalization. We chose to exclude major companies listed in exchanges of other economies such as Tencent and Alibaba to limit our sample size.</p>
<p style="text-align: justify;">Then we devised diversity and incentive scores to assign to those companies and compare those scores against a 5-year trend of their return on shareholders’ equity (ROE) ratios and 1-year stock performance from 1-July-19 to 30-June-20 over its corresponding exchange indices.</p>
<p style="text-align: justify;">The report covers diversity vs. incentives in Asia, diversity score vs. 1-year stock performance and ROE trend, incentives vs. 1-year stock performance and ROE trend, diversity + incentives scores vs. 1-year stock performance and ROE trend, companies with top and bottom diversity + incentive scores, countries with top and bottom average diversity + incentive scores, and incentive score vs. staffing cost trend. </p>
<p style="text-align: justify;">The results show that companies with high diversity scores do perform well. A high diversity score also has a positive impact on the ROE trend, based on our regression analysis at 95% confidence level. We found that employee incentives are not significant as staff diversity but they can still have an influence on company performances at a lower 90% confidence level.</p>
<p style="text-align: justify;">We note that this study is at the preliminary stage and stock performance is a function of many factors, not only the diversity scores that we concluded. Needless to say, our diversity and incentive scores also reflect the level of disclosures by selected companies, not necessarily the actual practice within each company. Our diversity and incentive scores are also not a credit rating or ranking with peers and, hence, do not reflect default probability of selected companies.</p>
<p style="text-align: justify;">We caution that in Asia, many diversity trends in the West may not apply. The fact that many Asian business communities may remain less sensitive to equal opportunities for females, disabled persons, or LGBTQ communities could make returns of Asian companies less correlated to diversity than in the West. Likewise, additional incentives in some countries in Asia may not be necessary as employees’ strong performance (i.e. in Japan) is a norm, according to the prevalent work culture.</p>
<p style="text-align: justify;">Bondcritic is developing a scoring model, which includes environment, social development, and corporate governance; the last of which cover diversity and incentives. This report is the first of the series to uncover shenanigans in the Asian corporate sector.</p>

In this Smartkarma Original, we seek to study how diversity and incentives influence stock performance and profitability. We tallied diversity and incentive data related to the board of directors, management, and employees across major economies in Asia and picked top 10 companies of each country in terms of market capitalization. We chose to exclude major companies listed in exchanges of other economies such as Tencent and Alibaba to limit our sample size.
Then we devised diversity and incentive scores to assign to those companies and compare those scores against a 5-year trend of their return on shareholders’ equity (ROE) ratios and 1-year stock performance from 1-July-19 to 30-June-20 over its corresponding exchange indices.
The report covers diversity vs. incentives in Asia, diversity score vs. 1-year stock performance and ROE trend, incentives vs. 1-year stock performance and ROE trend, diversity + incentives scores vs. 1-year stock performance and ROE trend, companies with top and bottom diversity + incentive scores, countries with top and bottom average diversity + incentive scores, and incentive score vs. staffing cost trend. 
The results show that companies with high diversity scores do perform well. A high diversity score also has a positive impact on the ROE trend, based on our regression analysis at 95% confidence level. We found that employee incentives are not significant as staff diversity but they can still have an influence on company performances at a lower 90% confidence level.
We note that this study is at the preliminary stage and stock performance is a function of many factors, not only the diversity scores that we concluded. Needless to say, our diversity and incentive scores also reflect the level of disclosures by selected companies, not necessarily the actual practice within each company. Our diversity and incentive scores are also not a credit rating or ranking with peers and, hence, do not reflect default probability of selected companies.
We caution that in Asia, many diversity trends in the West may not apply. The fact that many Asian business communities may remain less sensitive to equal opportunities for females, disabled persons, or LGBTQ communities could make returns of Asian companies less correlated to diversity than in the West. Likewise, additional incentives in some countries in Asia may not be necessary as employees’ strong performance (i.e. in Japan) is a norm, according to the prevalent work culture.
Bondcritic is developing a scoring model, which includes environment, social development, and corporate governance; the last of which cover diversity and incentives. This report is the first of the series to uncover shenanigans in the Asian corporate sector.

Asian Governance: Diversity & Incentives Through the Cultural Lens

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)

LG Chem: Spinout, Likely ECO Later, & 1P Diversion, Caused by Irrational Sentiment

???

Sanghyun Park

NPS - Greater Emphasis of ESG Based Investing for Korean Stocks & Bonds Starting 2021

It has been reported in the past few days that NPS is likely to put a greater emphasis on ESG (environmental, social, & governance) based...

Douglas Kim

Asia Short Interest Weekly: Tencent, SMIC, Meituan, Galaxy, Kao, Sumitomo, Alteogen, Genius, Largan

The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong...

Brian Freitas

Korea-New Deal Index: Constituents, Weights, & Market Reaction

The Korean government unveiled the specifics of the Korean version of the New Deal initiative.

Sanghyun Park

Asian Governance: Diversity & Incentives Through the Cultural Lens

In this Smartkarma Original, we seek to study how diversity and incentives influence stock performance and profitability. We tallied diversity and...

Bondcritic

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