Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<ul>
<li>In this insight, we discuss the recent Korean stock portfolio allocation changes by the NPS.</li>
<li>The data suggests that NPS has been increasing its holdings into more defensive sectors such as insurance, convenience stores, and industrials. </li>
<li>On the other hand, it has been decreasing capital allocation in consumer discretionary related stocks.</li>
</ul>


In this insight, we discuss the recent Korean stock portfolio allocation changes by the NPS.
The data suggests that NPS has been increasing its holdings into more defensive sectors such as insurance, convenience stores, and industrials. 
On the other hand, it has been decreasing capital allocation in consumer discretionary related stocks.


NPS: Increasing Capital Allocation to More Defensive Stocks in Korea

Cross Asset Strategy

<ul>
<li>NPS adjusted holdings of 101 stocks in Korea as of 5 April 2023, of which it reduced ownership in 53 of them and raised ownership in 47 of them.</li>
<li>In this insight, we discuss 39 stocks major stocks in Korea which have experienced changes in their ownerships by the NPS in the past several weeks. </li>
<li>NPS has noticeably increased stakes in reopening related plays and it has also reduced stakes in numerous rechargeable battery related plays in the past several weeks. </li>
</ul>


NPS adjusted holdings of 101 stocks in Korea as of 5 April 2023, of which it reduced ownership in 53 of them and raised ownership in 47 of them.
In this insight, we discuss 39 stocks major stocks in Korea which have experienced changes in their ownerships by the NPS in the past several weeks. 
NPS has noticeably increased stakes in reopening related plays and it has also reduced stakes in numerous rechargeable battery related plays in the past several weeks. 


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

Quantitative Analysis

<ul>
<li>Total short interest in Hong Kong is HK$435.1bn, marginally higher from end-December. Short notional has moved in line with the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a>. </li>
<li>Total short notional of the KOSPI and KOSDAQ market has moved up since end-December and is in line with the move higher in the <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200-index" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">KOSPI2 INDEX</a> and <a href="https://www.smartkarma.com/entities/kosdaq-150-index" target="_blank" data-smartkarma-citation="entities:31077:1" rel="noopener">KOSDAQ 150 Index</a>.</li>
<li>Short notional in Taiwan is lower over the quarter even as the <a href="https://www.smartkarma.com/entities/taiwan-stock-exchange-weighted-index" target="_blank" data-smartkarma-citation="entities:26056:1" rel="noopener">TWSE INDEX</a> has moved higher over the period. There has been big short covering on some stocks.</li>
</ul>


Total short interest in Hong Kong is HK$435.1bn, marginally higher from end-December. Short notional has moved in line with the Hong Kong Hang Seng Index (HSI INDEX). 
Total short notional of the KOSPI and KOSDAQ market has moved up since end-December and is in line with the move higher in the KOSPI2 INDEX and KOSDAQ 150 Index.
Short notional in Taiwan is lower over the quarter even as the TWSE INDEX has moved higher over the period. There has been big short covering on some stocks.


Short Interest Movements (Q1 2023): HK, Korea, Taiwan, Australia

Event-Driven

<ul>
<li>The Korea Exchange announced special changes in KOSPI 200 index.</li>
<li>Effective 3 April, <a href="https://www.smartkarma.com/entities/meritz-securities-co-ltd" target="_blank" data-smartkarma-citation="entities:19692:1" rel="noopener">Meritz Securities (008560 KS)</a> will be excluded from the KOSPI 200 index and <a href="https://www.smartkarma.com/entities/dgb-financial-group-inc" target="_blank" data-smartkarma-citation="entities:6138:1" rel="noopener">DGB Financial Group (139130 KS)</a> will replace it. </li>
<li>We think that there could be slightly better capital flow into DGB Financial as compared to other regional/smaller banks in Korea including BNK Financial</li>
</ul>


The Korea Exchange announced special changes in KOSPI 200 index.
Effective 3 April, Meritz Securities (008560 KS) will be excluded from the KOSPI 200 index and DGB Financial Group (139130 KS) will replace it. 
We think that there could be slightly better capital flow into DGB Financial as compared to other regional/smaller banks in Korea including BNK Financial


KOSPI 200: Special Changes & Rising Delinquency Ratios of Banks in Korea

<ul>
<li>As expected, <a href="https://www.smartkarma.com/entities/dgb-financial-group-inc" target="_blank" data-smartkarma-citation="entities:6138:1" rel="noopener">DGB Financial Group (139130 KS)</a> replaces <a href="https://www.smartkarma.com/entities/meritz-securities-co-ltd" target="_blank" data-smartkarma-citation="entities:19692:1" rel="noopener">Meritz Securities (008560 KS)</a> in 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 close on 31 March.</li>
<li>We estimate passive trackers will need to buy 5.15m shares (KRW 35.5bn; 12.1 days of ADV) of <a href="https://www.smartkarma.com/entities/dgb-financial-group-inc" target="_blank" data-smartkarma-citation="entities:6138:1" rel="noopener">DGB Financial Group (139130 KS)</a> at the close of trading on 31 March.</li>
<li>
<a href="https://www.smartkarma.com/entities/dgb-financial-group-inc" target="_blank" data-smartkarma-citation="entities:6138:1" rel="noopener">DGB Financial Group (139130 KS)</a> trades cheaper than its peers on forward PE and Price to Book. There could be relative outperformance over the next week.</li>
</ul>


As expected, DGB Financial Group (139130 KS) replaces Meritz Securities (008560 KS) in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the close on 31 March.
We estimate passive trackers will need to buy 5.15m shares (KRW 35.5bn; 12.1 days of ADV) of DGB Financial Group (139130 KS) at the close of trading on 31 March.

DGB Financial Group (139130 KS) trades cheaper than its peers on forward PE and Price to Book. There could be relative outperformance over the next week.


KOSPI200 Ad Hoc Index Rebalance: DGB Financial (139130 KS) To Replace Meritz Sec (008560 KS)

South Korea

Meritz Financial Group Inc is a holding company of Meritz Securities, Meritz Asset Management, Meritz Financial Information Service and et cetera. The Company manages and controls its financial subsidiaries.

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Meritz Financial Group (138040 KS)

NPS: Increasing Capital Allocation to More Defensive Stocks in Korea

In this insight, we discuss the recent Korean stock portfolio allocation changes by the NPS. The data suggests that NPS has been increasing its...

Douglas Kim

Recent NPS Buys and Sells in Korea

In this insight, we discuss 39 stocks major stocks in Korea which have experienced changes in their ownerships by the NPS in the past several weeks.

Douglas Kim

Short Interest Movements (Q1 2023): HK, Korea, Taiwan, Australia

The Insight looks at movements in short interest across HK, Korea, Taiwan and Australia stocks over Q1 and highlights large increases/decreases in...

Brian Freitas

KOSPI 200: Special Changes & Rising Delinquency Ratios of Banks in Korea

Korea Exchange announced special changes in KOSPI 200. Effective 3 April, Meritz Securities will be excluded from the KOSPI 200 index and DGB...

Douglas Kim

KOSPI200 Ad Hoc Index Rebalance: DGB Financial (139130 KS) To Replace Meritz Sec (008560 KS)

DGB Financial will be added to the KOSPI200 Index on 31 March. The stock trades cheaper than its peers but becomes short sell eligible from the...

Brian Freitas

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