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

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Event-Driven

<ul>
<li>To MID migrants: <a href="https://www.smartkarma.com/entities/amorepacific-group" target="_blank" data-smartkarma-citation="entities:12179:1" rel="noopener">Amorepacific Group (002790 KS)</a>, <a href="https://www.smartkarma.com/entities/e-mart-inc" target="_blank" data-smartkarma-citation="entities:6993:1" rel="noopener">E Mart (139480 KS)</a>, <a href="https://www.smartkarma.com/entities/iljin-materials-co-ltd" target="_blank" data-smartkarma-citation="entities:7709:1" rel="noopener">Iljin Materials (020150 KS)</a>, <a href="https://www.smartkarma.com/entities/hanjin-kal-corp" target="_blank" data-smartkarma-citation="entities:19086:1" rel="noopener">Hanjin KAL (180640 KS)</a>, <a href="https://www.smartkarma.com/entities/oci-co-ltd" target="_blank" data-smartkarma-citation="entities:1904:1" rel="noopener">OCI (010060 KS)</a>, <a href="https://www.smartkarma.com/entities/lx-semicon-co-ltd" target="_blank" data-smartkarma-citation="entities:20670:1" rel="noopener">LX Semicon (108320 KS)</a>, and <a href="https://www.smartkarma.com/entities/socar-inc" target="_blank" data-smartkarma-citation="entities:29693:1" rel="noopener">SOCAR (403550 KS)</a>
</li>
<li>To LARGE migrants: <a href="https://www.smartkarma.com/entities/hyundai-rotem-company" target="_blank" data-smartkarma-citation="entities:1554:1" rel="noopener">Hyundai Rotem (064350 KS)</a>, <a href="https://www.smartkarma.com/entities/hotel-shilla-co-ltd" target="_blank" data-smartkarma-citation="entities:107:1" rel="noopener">Hotel Shilla (008770 KS)</a>, <a href="https://www.smartkarma.com/entities/gs-retail-co-ltd" target="_blank" data-smartkarma-citation="entities:3867:1" rel="noopener">GS Retail (007070 KS)</a>, <a href="https://www.smartkarma.com/entities/cs-wind-corp" target="_blank" data-smartkarma-citation="entities:4883:1" rel="noopener">CS Wind (112610 KS)</a>, and <a href="https://www.smartkarma.com/entities/posco-international-corporation" target="_blank" data-smartkarma-citation="entities:5954:1" rel="noopener">Posco International (047050 KS)</a> </li>
<li>This time, the degree of predictability is high as the MC gap widened from an early point. So, we should consider building our position in phases from early next month.</li>
</ul>


To MID migrants: Amorepacific Group (002790 KS), E Mart (139480 KS), Iljin Materials (020150 KS), Hanjin KAL (180640 KS), OCI (010060 KS), LX Semicon (108320 KS), and SOCAR (403550 KS)

To LARGE migrants: Hyundai Rotem (064350 KS), Hotel Shilla (008770 KS), GS Retail (007070 KS), CS Wind (112610 KS), and Posco International (047050 KS) 
This time, the degree of predictability is high as the MC gap widened from an early point. So, we should consider building our position in phases from early next month.


KOSPI Size Index: Early Preview at One Fourth into Screening Period

<ul>
<li>We'd better pay attention to trading for price gain by building a position 2-3 weeks towards ex-dividend and getting out of it before ex-dividend, which often provides higher returns.</li>
<li>For this, we should focus on high dividend yield stocks, which also feature a high borrow rate, but on a decreasing trend.</li>
<li>They are <a href="https://www.smartkarma.com/entities/hyosung-tnc-co-ltd" target="_blank" data-smartkarma-citation="entities:27749:1" rel="noopener">Hyosung TNC (298020)</a>, <a href="https://www.smartkarma.com/entities/hd-hyundai" target="_blank" data-smartkarma-citation="entities:24075:1" rel="noopener">HD Hyundai (267250)</a>, <a href="https://www.smartkarma.com/entities/bnk-financial-group-inc" target="_blank" data-smartkarma-citation="entities:386:1" rel="noopener">BNK Financial (138930)</a>, <a href="https://www.smartkarma.com/entities/woori-financial-group-inc" target="_blank" data-smartkarma-citation="entities:27995:1" rel="noopener">Woori Financial (316140)</a>, <a href="https://www.smartkarma.com/entities/dl-e-c-co-ltd" target="_blank" data-smartkarma-citation="entities:31375:1" rel="noopener">DL E&amp;C (375500)</a>, <a href="https://www.smartkarma.com/entities/lx-semicon-co-ltd" target="_blank" data-smartkarma-citation="entities:20670:1" rel="noopener">LX Semicon (108320)</a>, <a href="https://www.smartkarma.com/entities/kb-financial-group-inc" target="_blank" data-smartkarma-citation="entities:718:1" rel="noopener">KB Financial (105560 KS)</a>, and <a href="https://www.smartkarma.com/entities/hdc-hyundai-development-co-engineering-construction" target="_blank" data-smartkarma-citation="entities:27397:1" rel="noopener">HDC Hyundai Development (294870)</a>.        </li>
</ul>


We'd better pay attention to trading for price gain by building a position 2-3 weeks towards ex-dividend and getting out of it before ex-dividend, which often provides higher returns.
For this, we should focus on high dividend yield stocks, which also feature a high borrow rate, but on a decreasing trend.
They are Hyosung TNC (298020), HD Hyundai (267250), BNK Financial (138930), Woori Financial (316140), DL E&amp;C (375500), LX Semicon (108320), KB Financial (105560 KS), and HDC Hyundai Development (294870).        


Yearend Dividend Play on Korean Stocks with High Yield/Borrow Rate

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

Index Rebalance

<ul>
<li>With the review period complete, we see 11 potential changes to the <a href="https://www.smartkarma.com/entities/kosdaq-150-index" target="_blank" data-smartkarma-citation="entities:31077:1" rel="noopener">KOSDAQ 150 Index (KOSDQ150 INDEX)</a> at the December rebalance.</li>
<li>Most of the potential changes are high probability ones, but there are some stocks that are very close to market cap and liquidity cutoffs.</li>
<li>The impact of passive trading will be much higher on the potential deletes as compared to the potential inclusions, though trade notionals are higher for the potential adds.</li>
</ul>


With the review period complete, we see 11 potential changes to the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance.
Most of the potential changes are high probability ones, but there are some stocks that are very close to market cap and liquidity cutoffs.
The impact of passive trading will be much higher on the potential deletes as compared to the potential inclusions, though trade notionals are higher for the potential adds.


KOSDAQ150 Index Rebalance Preview: Big Churn in IT, Healthcare Stocks

<ul>
<li>
<a href="https://www.smartkarma.com/entities/lx-semicon-co-ltd" target="_blank" data-smartkarma-citation="entities:20670:1" rel="noopener">LX Semicon (108320 KS)</a> will be traded on KOSPI from November 3rd. This event has no trade suspension. So, it will be traded on KOSDAQ until November 2nd.</li>
<li>
<a href="https://www.smartkarma.com/entities/nextin-inc" target="_blank" data-smartkarma-citation="entities:36097:1" rel="noopener">Nextin (348210 KS)</a> will replace LX Semicon for KOSDAQ 150. Again, the effective date is November 3rd. So, the index trackers will rebalance-trade at the close on November 2nd.</li>
<li>LX Semicon will see an outflow of -1.91x ADTV, whereas Nextin will enjoy an inflow of 3.93x ADTV. This Special Change will likely save <a href="https://www.smartkarma.com/entities/aptabio-therapeutics-inc" target="_blank" data-smartkarma-citation="entities:34894:1" rel="noopener">AptaBio Therapeutics (293780 KS)</a> from deletion.</li>
</ul>



LX Semicon (108320 KS) will be traded on KOSPI from November 3rd. This event has no trade suspension. So, it will be traded on KOSDAQ until November 2nd.

Nextin (348210 KS) will replace LX Semicon for KOSDAQ 150. Again, the effective date is November 3rd. So, the index trackers will rebalance-trade at the close on November 2nd.
LX Semicon will see an outflow of -1.91x ADTV, whereas Nextin will enjoy an inflow of 3.93x ADTV. This Special Change will likely save AptaBio Therapeutics (293780 KS) from deletion.


LX Semicon KOSPI Migration & KOSDAQ 150 Special Change

<ul>
<li>Following its planned section transfer, <a href="https://www.smartkarma.com/entities/lx-semicon-co-ltd" target="_blank" data-smartkarma-citation="entities:20670:1" rel="noopener">LX Semicon (108320 KS)</a> will be deleted from the <a href="https://www.smartkarma.com/entities/kosdaq-150-index" target="_blank" data-smartkarma-citation="entities:31077:1" rel="noopener">KOSDAQ 150 Index</a> at the close on 2 November and replaced by <a href="https://www.smartkarma.com/entities/nextin-inc" target="_blank" data-smartkarma-citation="entities:36097:1" rel="noopener">Nextin (348210 KS)</a>.</li>
<li>Passive trackers will need to buy over 4.5 days of ADV on <a href="https://www.smartkarma.com/entities/nextin-inc" target="_blank" data-smartkarma-citation="entities:36097:1" rel="noopener">Nextin (348210 KS)</a> and sell over 1.5 days of ADV on <a href="https://www.smartkarma.com/entities/lx-semicon-co-ltd" target="_blank" data-smartkarma-citation="entities:20670:1" rel="noopener">LX Semicon (108320 KS)</a>. </li>
<li>Belonging to the Information Technology sector, there is zero chance of <a href="https://www.smartkarma.com/entities/lx-semicon-co-ltd" target="_blank" data-smartkarma-citation="entities:20670:1" rel="noopener">LX Semicon (108320 KS)</a> being added to 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>.</li>
</ul>


Following its planned section transfer, LX Semicon (108320 KS) will be deleted from the KOSDAQ 150 Index at the close on 2 November and replaced by Nextin (348210 KS).
Passive trackers will need to buy over 4.5 days of ADV on Nextin (348210 KS) and sell over 1.5 days of ADV on LX Semicon (108320 KS). 
Belonging to the Information Technology sector, there is zero chance of LX Semicon (108320 KS) being added to the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX).


KOSDAQ150 Ad Hoc Index Rebalance: LX Semicon OUT, Nextin IN

South Korea

LX Semicon Co., Ltd. designs, develops, and markets mixed-signal semiconductors. The Company utilizes its own algorithm and technologies to enhance the features and capabilities of flat panel displays that are used in electronic devices and mobile handsets. LX Semicon markets its products worldwide.

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LX Semicon (108320 KS)

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KOSDAQ150 Index Rebalance Preview: Big Churn in IT, Healthcare Stocks

There could be 11 changes at the Dec rebalance. Most changes are high probability and will result in a big churn in the IT & Healthcare sectors....

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LX Semicon KOSPI Migration & KOSDAQ 150 Special Change

This post details LX Semicon's KOSPI migration and the KOSDAQ 150 Special Change, both of which are effective November 3rd.

Sanghyun Park

KOSDAQ150 Ad Hoc Index Rebalance: LX Semicon OUT, Nextin IN

Nextin will replace LX Semicon in the KOSDAQ150 Index at the close on 2 Nov. Passives need to buy over 4.5x ADV on Nextin and sell over 1.5x ADV on...

Brian Freitas

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