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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>On 20 May, we recommended selling <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> and buying <a href="https://www.smartkarma.com/entities/kt-corp" target="_blank" data-smartkarma-citation="entities:1112:1" rel="noopener">KT Corp (030200 KS)</a>. That trade is up 12% over the last month.</li>
<li>Foreign investors have sold 2.5m shares 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> in the last month while buying 2.8m shares of <a href="https://www.smartkarma.com/entities/kt-corp" target="_blank" data-smartkarma-citation="entities:1112:1" rel="noopener">KT Corp (030200 KS)</a>. </li>
<li>With the price ratio trading at a 4 year low, we feel is is time to start unwinding the trade and waiting for a little bit before reversing it.</li>
</ul>


On 20 May, we recommended selling SK Telecom (017670 KS) and buying KT Corp (030200 KS). That trade is up 12% over the last month.
Foreign investors have sold 2.5m shares of SK Telecom (017670 KS) in the last month while buying 2.8m shares of KT Corp (030200 KS). 
With the price ratio trading at a 4 year low, we feel is is time to start unwinding the trade and waiting for a little bit before reversing it.


SK Telecom / KT Corp: Foreign Room, Passive Flow & Trade Update

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<ul>
<li>It was reported that KT will provide an extra 15% to its employees who purchase KT's treasury shares worth 5 million won ($4,000) to 20 million won ($16,000).</li>
<li>We have a positive view of this extra 15% bonus for ESOP treasury shares purchase. It has the positive effect of increasing demand for KT shares among its employees.</li>
<li>If 10,000 employees purchase 10 million won per person, this would be 115 billion won in total (including 15% extra provided by KT). </li>
</ul>


It was reported that KT will provide an extra 15% to its employees who purchase KT's treasury shares worth 5 million won ($4,000) to 20 million won ($16,000).
We have a positive view of this extra 15% bonus for ESOP treasury shares purchase. It has the positive effect of increasing demand for KT shares among its employees.
If 10,000 employees purchase 10 million won per person, this would be 115 billion won in total (including 15% extra provided by KT). 


KT Grants Extra 15% for ESOP Treasury Shares Purchase

Equity Bottom-Up

<ul>
<li>We analyzed the different share price movements of SK Telecom relative to KT and LG Uplus from 2005 to 2022 when foreign ownership of SK Telecom remained above 99%.</li>
<li>From 2005 to 2022, KT and LG Uplus outperformed SKT in 7 and 6 out of 11 periods, respectively when the foreign ownership of SKT was above 99%.</li>
<li>Once KT's foreign ownership rises to the 93-95% range, there will be more concerns about foreign ownership limit which means that LG Uplus could be in focus once again. </li>
</ul>


We analyzed the different share price movements of SK Telecom relative to KT and LG Uplus from 2005 to 2022 when foreign ownership of SK Telecom remained above 99%.
From 2005 to 2022, KT and LG Uplus outperformed SKT in 7 and 6 out of 11 periods, respectively when the foreign ownership of SKT was above 99%.
Once KT's foreign ownership rises to the 93-95% range, there will be more concerns about foreign ownership limit which means that LG Uplus could be in focus once again. 


Price Comparisons of SK Telecom, KT, & LG Uplus When SK Telecom Reaches 99%+ Foreign Ownership

<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>On 22 February, the KRX announced that LG Energy Solution (373220 KS) will be included in numerous local indices including KOSPI 200, KOSPI 100, and KRX 100 effective 3/11/2022.</li>
<li>This has been widely expected by the market. Due to the inclusion in KOSPI 200, investors will be able to short LG Energy Solution starting 11 March. </li>
<li>Once Dongwon F&amp;B is excluded from the KOSPI 200 index, this could be a key buying opportunity on this stock, given the company's solid fundamentals. </li>
</ul>


On 22 February, the KRX announced that LG Energy Solution (373220 KS) will be included in numerous local indices including KOSPI 200, KOSPI 100, and KRX 100 effective 3/11/2022.
This has been widely expected by the market. Due to the inclusion in KOSPI 200, investors will be able to short LG Energy Solution starting 11 March. 
Once Dongwon F&amp;B is excluded from the KOSPI 200 index, this could be a key buying opportunity on this stock, given the company's solid fundamentals. 


KOSPI 200: LG Energy Solution Inclusion and Dongwon F&B Exclusion

South Korea

LG Uplus Corp., an affiliate of LG Group, provides a wide range of personal communications services (PCS) using code division multiple access (CDMA) technology.  The Company offers call forwarding, call and data transfer, call waiting, voice mail, Internet-phone, prepaid call, and authentication text-to-speech (TTS) services.

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LG Uplus Corp (032640 KS)

SK Telecom / KT Corp: Foreign Room, Passive Flow & Trade Update

SK Telecom has underperformed KT Corp by 12% over the last month. Foreign investors have been selling SK Tel & buying KT Corp. The price ratio is...

Brian Freitas

KT Grants Extra 15% for ESOP Treasury Shares Purchase

It was reported that KT will provide an extra 15% to its employees who purchase KT's treasury shares worth 5 million won ($4,000) to 20 million won...

Douglas Kim

Price Comparisons of SK Telecom, KT, & LG Uplus When SK Telecom Reaches 99%+ Foreign Ownership

We analyzed the different share price movements of SK Telecom relative to KT and LG Uplus from 2005 to 2022 when foreign ownership of SK Telecom...

Douglas Kim

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

KOSPI 200: LG Energy Solution Inclusion and Dongwon F&B Exclusion

On 22 February, the KRX announced that LG Energy Solution (373220 KS) will be included in numerous local indices including KOSPI 200, KOSPI 100,...

Douglas Kim

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