Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

HDC Hyundai Development Co-Engineering & Construction / Equity Bottom-Up

HDC Hyundai Development Co-Engineering & Construction

<ul>
<li>On 28 January, the government (Ministry of Land, Infrastructure and Transport) announced that it has recommended the heaviest punishment of the cancellation of the construction license for HDC Hyundai Development.</li>
<li>Seoul city government said it will make a decision on the fate of HDC Hyundai Development within six months.</li>
<li>Rather than a complete, permanent cancellation of the company's business license, a more likely scenario is about 6 to 12 months of temporary business operation suspension, in our view. </li>
</ul>


On 28 January, the government (Ministry of Land, Infrastructure and Transport) announced that it has recommended the heaviest punishment of the cancellation of the construction license for HDC Hyundai Development.
Seoul city government said it will make a decision on the fate of HDC Hyundai Development within six months.
Rather than a complete, permanent cancellation of the company's business license, a more likely scenario is about 6 to 12 months of temporary business operation suspension, in our view. 


HDC Hyundai Development: Permanent Business License Cancellation or Temporary Business Suspension?

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

Myoung Shin Industrial Co.,Ltd / Event-Driven

<ul>
<li>This post measures how far the rebalancing trading of passive funds is progressing at this point. This can be essential data for setting up positions close to the effective date.</li>
<li>For this purpose, each stock's net purchase data of Pension and Insurance were collected from November 25 to today (30th).</li>
<li>As we move closer to the effective date, we need to consider selecting those with the relatively slow progress of rebalancing trading among the regular rebalancing stocks.</li>
</ul>


This post measures how far the rebalancing trading of passive funds is progressing at this point. This can be essential data for setting up positions close to the effective date.
For this purpose, each stock's net purchase data of Pension and Insurance were collected from November 25 to today (30th).
As we move closer to the effective date, we need to consider selecting those with the relatively slow progress of rebalancing trading among the regular rebalancing stocks.


KOSPI 200 Rebalancing Trading Progress Checkup

<ul>
<li>KOSPI 200 rebalancing results are out - <strong>7 Additions: 4 (regular) + 2 (Fast Entry) + 1 (split) &amp; 7 Deletions: 6 (regular) + 1 (Fast Entry) </strong>
</li>
<li>The passive impact of all additions is pretty significant. In particular, <strong>Meritiz, SL, and Kakao Pay</strong> are relatively larger.</li>
<li>For the deletes, it is worth considering approaching these stocks as <strong>an equal-weighted basket</strong>. Since their share prices have not been significantly corrected recently.</li>
</ul>


KOSPI 200 rebalancing results are out - 7 Additions: 4 (regular) + 2 (Fast Entry) + 1 (split) &amp; 7 Deletions: 6 (regular) + 1 (Fast Entry) 

The passive impact of all additions is pretty significant. In particular, Meritiz, SL, and Kakao Pay are relatively larger.
For the deletes, it is worth considering approaching these stocks as an equal-weighted basket. Since their share prices have not been significantly corrected recently.


7 Adds & 7 Deletes in KOSPI 200 Rebalancing: Passive Impact & Trade Setups

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

<ul>
<li>There will be 6 additions and 7 deletions for the <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200-index" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX)</a> at the December rebalance that will be implemented on 9 December.</li>
<li>
<a href="https://www.smartkarma.com/entities/hyundai-heavy-industries-co-ltd" target="_blank" data-smartkarma-citation="entities:33808:1" rel="noopener">Hyundai Heavy Industries (329180 KS)</a> and <a href="https://www.smartkarma.com/entities/kakao-pay-corp" target="_blank" data-smartkarma-citation="entities:29675:1" rel="noopener">Kakao Pay (377300 KS)</a> are Fast Entry inclusions to the index, while <a href="https://www.smartkarma.com/entities/innocean-worldwide-inc" target="_blank" data-smartkarma-citation="entities:26925:1" rel="noopener">Innocean Worldwide (214320 KS)</a> is a deletion on liquidity.</li>
<li>Depending on the float used by KRX, there could be a sharp move higher on <a href="https://www.smartkarma.com/entities/kakao-pay-corp" target="_blank" data-smartkarma-citation="entities:29675:1" rel="noopener">Kakao Pay (377300 KS)</a> as passive trackers could buy up to 15% of real float.</li>
</ul>


There will be 6 additions and 7 deletions for the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the December rebalance that will be implemented on 9 December.

Hyundai Heavy Industries (329180 KS) and Kakao Pay (377300 KS) are Fast Entry inclusions to the index, while Innocean Worldwide (214320 KS) is a deletion on liquidity.
Depending on the float used by KRX, there could be a sharp move higher on Kakao Pay (377300 KS) as passive trackers could buy up to 15% of real float.


KOSPI200 Index Rebalance: Mostly Expected, Couple of Surprises

<h2>Rebalancing results</h2><p>The review period for the KOSPI 200 December rebalancing ended on October 29. Below are the results of applying the screening criteria based on the average daily market cap of the review period (May 3 to October 29).</p><section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/239/758/original/Screen+Shot+2021-11-04+at+7.22.44+PM.png?1636068186" class="editor-image img-responsive" data-smartkarma-image-id="239758"></figure></section><ul>
<li><strong>As a result of regular rebalancing, we can see four adds and four deletes.</strong></li>
<li><strong>In addition, Hyundai Heavy Industries and Kakao Pay are almost 100% likely to join the KOSPI 200 through Fast Entry. The joining date of both will be December 10, the same date as the regular rebalancing.</strong></li>
<li><strong>The stocks that will leave the KOSPI 200 for HHI and Kakao Pay will be Nexen Tire and Lotte Himart (the stocks with the lowest average daily market cap in the previous review period).</strong></li>
</ul>
<h2>Passive impact</h2>
<p>The following is a passive impact assuming KOSPI 200 tracking funds at ₩80T, including both local pensions and variable insurance index funds in addition to ETFs/index funds.</p>
<div class="content-highlight"><p><strong>Compared to the absolute size of the passive impact, Meritz Financial Group (add) and Nexen Tire (delete) are likely to face relatively large flow effects.</strong></p></div>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/239/760/original/Screen+Shot+2021-11-04+at+7.29.44+PM.png?1636068621" class="editor-image img-responsive" data-smartkarma-image-id="239760"></figure></section><p>Below is a passive impact that we can expect if only ₩20T of funds from local ETFs/index funds are applied. This can be seen as a size that will occur on the implementation date (at the close on December 9).</p>
<section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/239/764/original/Screen+Shot+2021-11-04+at+7.36.10+PM.png?1636068984" class="editor-image img-responsive" data-smartkarma-image-id="239764"></figure></section></section></section>

Rebalancing resultsThe review period for the KOSPI 200 December rebalancing ended on October 29. Below are the results of applying the screening criteria based on the average daily market cap of the review period (May 3 to October 29).
As a result of regular rebalancing, we can see four adds and four deletes.
In addition, Hyundai Heavy Industries and Kakao Pay are almost 100% likely to join the KOSPI 200 through Fast Entry. The joining date of both will be December 10, the same date as the regular rebalancing.
The stocks that will leave the KOSPI 200 for HHI and Kakao Pay will be Nexen Tire and Lotte Himart (the stocks with the lowest average daily market cap in the previous review period).

Passive impact
The following is a passive impact assuming KOSPI 200 tracking funds at ₩80T, including both local pensions and variable insurance index funds in addition to ETFs/index funds.
Compared to the absolute size of the passive impact, Meritz Financial Group (add) and Nexen Tire (delete) are likely to face relatively large flow effects.
Below is a passive impact that we can expect if only ₩20T of funds from local ETFs/index funds are applied. This can be seen as a size that will occur on the implementation date (at the close on December 9).


KOSPI 200 Rebalancing Update After the Review Period Ended

South Korea

LX Hausys, Ltd. manufactures various building materials such as wallcoverings, windows, floor coverings, and acrylic solid surfaces. The Company also produces finishing materials like high-gloss sheets used in home appliances and injection -molded parts & interior coverstocks for auto industry. LX Hausys markets its products worldwide.

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LX Hausys Ltd (108670 KS)

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Brian Freitas

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Sanghyun Park

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