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>Notable names that have proposed amendments to their articles of association for changing the dividend record date at this year's AGM include Hyundai Motor Group, POSCO Holdings, and Kakao Corp.</li>
<li>There were skeptical views on how much response local big-name companies would show to Korea FSC's plan. However, the response from large companies has been unexpectedly positive and aggressive.</li>
<li>We should consider the possibility that the preferred stock premium of companies whose dividend visibility has improved through this may continue to improve compared to those that have not.</li>
</ul>


Notable names that have proposed amendments to their articles of association for changing the dividend record date at this year's AGM include Hyundai Motor Group, POSCO Holdings, and Kakao Corp.
There were skeptical views on how much response local big-name companies would show to Korea FSC's plan. However, the response from large companies has been unexpectedly positive and aggressive.
We should consider the possibility that the preferred stock premium of companies whose dividend visibility has improved through this may continue to improve compared to those that have not.


Dividend Record Date Changes Already in Progress in Korea: Trading Ramifications

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<ul>
<li>The MSCI EM vs.EAFE ratio (local currency) shows EM has outperformed relative to EAFE since the DXY peaked in November 2022, and also shows signs of reversing the 2-year downtrend.</li>
<li>As long as the DXY remains below $103.50-$106, we expect outperformance from EM to continue.</li>
<li>China/Hong Kong, Greece, South Africa, and Mexico stand out as attractive countries. Our top actionable Sectors include Communications, Consumer Discretionary, and Technology. We highlight 76 attractive EM stocks.</li>
</ul>


The MSCI EM vs.EAFE ratio (local currency) shows EM has outperformed relative to EAFE since the DXY peaked in November 2022, and also shows signs of reversing the 2-year downtrend.
As long as the DXY remains below $103.50-$106, we expect outperformance from EM to continue.
China/Hong Kong, Greece, South Africa, and Mexico stand out as attractive countries. Our top actionable Sectors include Communications, Consumer Discretionary, and Technology. We highlight 76 attractive EM stocks.


EM Outperformance to Continue (Vs. EAFE) -- Add on a Pullback; DXY Needs to Hold Below $106

<ul>
<li>KDB recently initiated the process of selecting an advisory firm to sell its stake in HMM, which will likely be the first to implement the mandatory offer rule.</li>
<li>Potential bidders include Hyundai Glovis, LX Holdings, and Samsung SDS. As for POSCO Holdings, it recently said that it is not considering acquiring HMM.</li>
<li>Given that HMM is the only national shipping company, there is a good chance that multiple bidders will appear, which will lead to a premium to the market price.</li>
</ul>


KDB recently initiated the process of selecting an advisory firm to sell its stake in HMM, which will likely be the first to implement the mandatory offer rule.
Potential bidders include Hyundai Glovis, LX Holdings, and Samsung SDS. As for POSCO Holdings, it recently said that it is not considering acquiring HMM.
Given that HMM is the only national shipping company, there is a good chance that multiple bidders will appear, which will lead to a premium to the market price.


HMM Is Likely the First to Be Subject to the Mandatory Offer that Comes into Force

<ul>
<li>
 Kakao managed to stay out of the relegation zone. Instead, Kia was pushed to the borderline. But POSCO failed to up its float rate, so Kia stayed in.</li>
<li>Besides that, LG Energy Solution and Celltrion made it to the index, replacing KB Financial and Shinhan Financial.</li>
<li>These passive flows appears to be of sufficient magnitude to cause a substantial price impact on T-1 Effectiveness. But it should also be approached with a fairly short window.</li>
</ul>



 Kakao managed to stay out of the relegation zone. Instead, Kia was pushed to the borderline. But POSCO failed to up its float rate, so Kia stayed in.
Besides that, LG Energy Solution and Celltrion made it to the index, replacing KB Financial and Shinhan Financial.
These passive flows appears to be of sufficient magnitude to cause a substantial price impact on T-1 Effectiveness. But it should also be approached with a fairly short window.


TIGER Top 10 Rebalancing: Four Names to Trade on T-1 Effective

<ul>
<li>There was a substantial increase in the AUM even in the current market condition. More funds must have sought blue chip stocks as relatively safe assets in this volatile market.</li>
<li>Celltrion and LG Energy Solution will likely replace KB Financial and Shinhan Financial. On the other hand, POSCO is out of the race even with a +5%p float rate change.</li>
<li>LG Energy also has an up-weight event of the KOSPI 200. Since these passive flow events have an interval of only one day, we expect a fairly concentrated passive impact.</li>
</ul>


There was a substantial increase in the AUM even in the current market condition. More funds must have sought blue chip stocks as relatively safe assets in this volatile market.
Celltrion and LG Energy Solution will likely replace KB Financial and Shinhan Financial. On the other hand, POSCO is out of the race even with a +5%p float rate change.
LG Energy also has an up-weight event of the KOSPI 200. Since these passive flow events have an interval of only one day, we expect a fairly concentrated passive impact.


TIGER (FnGuide) Top 10 ETF Rebalancing: Noteworthy Changes Emerging

South Korea

POSCO Holdings Inc. manufactures and distributes steel products. The Company produces crude steel, hot rolled steel, cold rolled steel, stainless steel, steel plates, wire rods, galvanized steel, electrical steel, and other related products. POSCO Holdings markets its products worldwide.

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POSCO Holdings (005490 KS)

Dividend Record Date Changes Already in Progress in Korea: Trading Ramifications

We currently see more swift and active progress in changing dividend record dates, signaling a shift in dividend arbitrage trading patterns and...

Sanghyun Park

EM Outperformance to Continue (Vs. EAFE) -- Add on a Pullback; DXY Needs to Hold Below $106

EM vs. EAFE ratio (local currency) shows EM has outperformed relative to EAFE since the $DXY peaked in November 2022. If the DXY remains below...

Vermilion Research

HMM Is Likely the First to Be Subject to the Mandatory Offer that Comes into Force

This post investigates KDB's HMM stake sale reportedly initiated last week and discusses the possibility that this deal will be the first to be...

Sanghyun Park

TIGER Top 10 Rebalancing: Four Names to Trade on T-1 Effective

This post screens four names to trade at the TIGER Top 10 ETF rebalancing in December based on FnGuide's latest float rates, and discusses trading...

Sanghyun Park

TIGER (FnGuide) Top 10 ETF Rebalancing: Noteworthy Changes Emerging

This post investigates the current rebalancing status of the TIGER Top 10 ETF, the largest AUM sector ETF in Korea, and previews the resulting...

Sanghyun Park

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