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

<p>Eight local shares in Korea have ADRs listed on NYSE.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/230/988/original/3.png?1632199949" class="editor-image img-responsive" data-smartkarma-image-id="230988"></figure><p>KT, Shinhan Financial, SK Telecom, and POSCO have relatively large outstanding ADRs compared to their issuance cap. In particular, KT, SK Telecom, and POSCO hold a significant amount of ADRs even compared to their total number of issued shares.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/230/990/original/4.png?1632200533" class="editor-image img-responsive" data-smartkarma-image-id="230990"></figure></section><hr>
<p><strong>Most of these shares have greatly expanded their price disparity with the underlying shares due to the correction of the NYSE last Friday and today and the closure of the local stock market.</strong></p></section><div class="content-highlight"><p>Among them, POSCO has the widest price gap. The ADR is at a 5.09% discount to the underlying share as of today's closing price. On the other hand, LG Display's ADR rose close to 3% today, at a 0.61% premium to the underlying share.</p></div><section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/230/992/original/10.png?1632203660" class="editor-image img-responsive" data-smartkarma-image-id="230992"></figure></section></section>

Eight local shares in Korea have ADRs listed on NYSE.KT, Shinhan Financial, SK Telecom, and POSCO have relatively large outstanding ADRs compared to their issuance cap. In particular, KT, SK Telecom, and POSCO hold a significant amount of ADRs even compared to their total number of issued shares.

Most of these shares have greatly expanded their price disparity with the underlying shares due to the correction of the NYSE last Friday and today and the closure of the local stock market.Among them, POSCO has the widest price gap. The ADR is at a 5.09% discount to the underlying share as of today's closing price. On the other hand, LG Display's ADR rose close to 3% today, at a 0.61% premium to the underlying share.

Korea ADRs at a Substantial Price Disparity: Watch LG Display & POSCO

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

Quantitative Analysis

<p>This insight provides the output, and an overview of our, machine learning-driven, proprietary GEM screening model, which takes a three-pronged approach to find the best medium-term long ideas within the top100 largest stocks in the MSCI GEM Index. </p><p>The model is based on 1) a typical quantitative multifactor screening model, enhanced by two Artificial Intelligence Technology-based approaches using 2) a Deep Neural Network model, and 3) a Recurrent Neural Network model. </p><p>This model, which has been developed and tweaked over the past 24 months (and implemented in its current state for &gt;12 months), has a solid real-world performance track record, which I set out in the detail below. </p><p>Notable new entrants to the top decile this month include bottom-fishing in Chinese education through <a href="https://www.smartkarma.com/entities/new-oriental-education-tech-grp-adr" target="_blank" data-smartkarma-citation="entities:531:1" rel="noopener">New Oriental Education (EDU US)</a>, Russian internet play <a href="https://www.smartkarma.com/entities/yandex-nv-a" target="_blank" data-smartkarma-citation="entities:414:1" rel="noopener">Yandex (YNDX US)</a>, Brazilian beverages giant <a href="https://www.smartkarma.com/entities/ambev-sa" target="_blank" data-smartkarma-citation="entities:24454:1" rel="noopener">Ambev SA (ABEV3 BZ)</a>, and a rebound call on <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>.</p><table class="table table-striped">
<colgroup>
<col>
<col>
<col>
<col>
<col>
</colgroup>
<tbody>
<tr>
<td style="text-align: center; width: 74.9062px;">rank</td>
<td style="width: 262.578px;">Name</td>
<td style="width: 185.766px;">Sector</td>
<td style="width: 147.797px;">Location</td>
<td style="text-align: center; width: 74.9531px;">prev.</td>
</tr>
<tr>
<td style="text-align: center; width: 74.9062px;">1</td>
<td style="width: 262.578px;">
<a href="https://www.smartkarma.com/entities/tata-consultancy-svcs-ltd" target="_blank" data-smartkarma-citation="entities:18708:1" rel="noopener">Tata Consultancy Svcs (TCS IN)</a> </td>
<td style="width: 185.766px;">Information Technology</td>
<td style="width: 147.797px;">India</td>
<td style="text-align: center; width: 74.9531px;">19</td>
</tr>
<tr>
<td style="text-align: center; width: 74.9062px;">2</td>
<td style="width: 262.578px;">
<a href="https://www.smartkarma.com/entities/shenzhou-intl-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10415:1" rel="noopener">Shenzhou Intl Group Holdings (2313 HK)</a> </td>
<td style="width: 185.766px;">Consumer Discretionary</td>
<td style="width: 147.797px;">China</td>
<td style="text-align: center; width: 74.9531px;">12</td>
</tr>
<tr>
<td style="text-align: center; width: 74.9062px;">3</td>
<td style="width: 262.578px;">
<a href="https://www.smartkarma.com/entities/new-oriental-education-technology-group" target="_blank" data-smartkarma-citation="entities:32210:1" rel="noopener">New Oriental Education &amp; Technology Group (9901 HK)</a> </td>
<td style="width: 185.766px;">Consumer Discretionary</td>
<td style="width: 147.797px;">China</td>
<td style="text-align: center; width: 74.9531px;">92</td>
</tr>
<tr>
<td style="text-align: center; width: 74.9062px;">4</td>
<td style="width: 262.578px;">
<a href="https://www.smartkarma.com/entities/yandex-nv-a" target="_blank" data-smartkarma-citation="entities:414:1" rel="noopener">Yandex (YNDX US)</a> </td>
<td style="width: 185.766px;">Communication</td>
<td style="width: 147.797px;">Russian Federation</td>
<td style="text-align: center; width: 74.9531px;">88</td>
</tr>
<tr>
<td style="text-align: center; width: 74.9062px;">5</td>
<td style="width: 262.578px;">
<a href="https://www.smartkarma.com/entities/china-resources-land-ltd" target="_blank" data-smartkarma-citation="entities:418:1" rel="noopener">China Resources Land (1109 HK)</a> </td>
<td style="width: 185.766px;">Real Estate</td>
<td style="width: 147.797px;">China</td>
<td style="text-align: center; width: 74.9531px;">33</td>
</tr>
<tr>
<td style="text-align: center; width: 74.9062px;">6</td>
<td style="width: 262.578px;">
<a href="https://www.smartkarma.com/entities/ambev-sa" target="_blank" data-smartkarma-citation="entities:24454:1" rel="noopener">Ambev SA (ABEV3 BZ)</a> </td>
<td style="width: 185.766px;">Consumer Staples</td>
<td style="width: 147.797px;">Brazil</td>
<td style="text-align: center; width: 74.9531px;">56</td>
</tr>
<tr>
<td style="text-align: center; width: 74.9062px;">7</td>
<td style="width: 262.578px;">
<a href="https://www.smartkarma.com/entities/ncsoft-corp" target="_blank" data-smartkarma-citation="entities:5169:1" rel="noopener">NCSOFT Corp (036570 KS)</a> </td>
<td style="width: 185.766px;">Communication</td>
<td style="width: 147.797px;">Korea (South)</td>
<td style="text-align: center; width: 74.9531px;">18</td>
</tr>
<tr>
<td style="text-align: center; width: 74.9062px;">8</td>
<td style="width: 262.578px;">
<a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> </td>
<td style="width: 185.766px;">Communication</td>
<td style="width: 147.797px;">China</td>
<td style="text-align: center; width: 74.9531px;">61</td>
</tr>
<tr>
<td style="text-align: center; width: 74.9062px;">9</td>
<td style="width: 262.578px;">
<a href="https://www.smartkarma.com/entities/hindustan-unilever-ltd" target="_blank" data-smartkarma-citation="entities:13828:1" rel="noopener">Hindustan Unilever (HUVR IN)</a> </td>
<td style="width: 185.766px;">Consumer Staples</td>
<td style="width: 147.797px;">India</td>
<td style="text-align: center; width: 74.9531px;">70</td>
</tr>
<tr>
<td style="text-align: center; width: 74.9062px;">10</td>
<td style="width: 262.578px;">
<a href="https://www.smartkarma.com/entities/maruti-suzuki-india-ltd" target="_blank" data-smartkarma-citation="entities:733:1" rel="noopener">Maruti Suzuki India (MSIL IN)</a> </td>
<td style="width: 185.766px;">Consumer Discretionary</td>
<td style="width: 147.797px;">India</td>
<td style="text-align: center; width: 74.9531px;">89</td>
</tr>
<tr><td colspan="5" style="text-align: left; width: 746px;"><em>Source: FactSet financial data and analytics, my estimates and calculations, Tensorflow, Keras, Google Colaboratory, pandas</em></td></tr>
</tbody>
</table><p><em>As usual, please feel free to reach out for the full output table, any questions, clarifications needed or suggestions.</em></p>

This insight provides the output, and an overview of our, machine learning-driven, proprietary GEM screening model, which takes a three-pronged approach to find the best medium-term long ideas within the top100 largest stocks in the MSCI GEM Index. The model is based on 1) a typical quantitative multifactor screening model, enhanced by two Artificial Intelligence Technology-based approaches using 2) a Deep Neural Network model, and 3) a Recurrent Neural Network model. This model, which has been developed and tweaked over the past 24 months (and implemented in its current state for &gt;12 months), has a solid real-world performance track record, which I set out in the detail below. Notable new entrants to the top decile this month include bottom-fishing in Chinese education through New Oriental Education (EDU US), Russian internet play Yandex (YNDX US), Brazilian beverages giant Ambev SA (ABEV3 BZ), and a rebound call on Tencent (700 HK).









rank
Name
Sector
Location
prev.


1

Tata Consultancy Svcs (TCS IN) 
Information Technology
India
19


2

Shenzhou Intl Group Holdings (2313 HK) 
Consumer Discretionary
China
12


3

New Oriental Education &amp; Technology Group (9901 HK) 
Consumer Discretionary
China
92


4

Yandex (YNDX US) 
Communication
Russian Federation
88


5

China Resources Land (1109 HK) 
Real Estate
China
33


6

Ambev SA (ABEV3 BZ) 
Consumer Staples
Brazil
56


7

NCSOFT Corp (036570 KS) 
Communication
Korea (South)
18


8

Tencent (700 HK) 
Communication
China
61


9

Hindustan Unilever (HUVR IN) 
Consumer Staples
India
70


10

Maruti Suzuki India (MSIL IN) 
Consumer Discretionary
India
89

Source: FactSet financial data and analytics, my estimates and calculations, Tensorflow, Keras, Google Colaboratory, pandas

As usual, please feel free to reach out for the full output table, any questions, clarifications needed or suggestions.

SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Equity Bottom-Up

SGX Asia Currencies and Commodities Insights

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<div class="content-highlight"><p>Our base case valuation of Aju Steel is implied market cap of 377 billion won or target price of 14,240 won per share, which would represent just 2% above the mid-point of the IPO price range (13,900 won). Given the lack of upside versus the IPO price range, we would AVOID this IPO. </p></div>

Our base case valuation of Aju Steel is implied market cap of 377 billion won or target price of 14,240 won per share, which would represent just 2% above the mid-point of the IPO price range (13,900 won). Given the lack of upside versus the IPO price range, we would AVOID this IPO. 

<p>Founded in 1995, Aju Steel specializes in producing color steel sheets. Color steel sheet is a high value-added material that has improved durability and functionality by processing the surface of steel to realize various colors and patterns. The company's color steel sheet products are mainly applied to premium home appliances and building interior and exterior materials where design is important. </p><p>The IPO price range of Aju Steel is from 12,700 won to 15,100 won. The IPO deal size is $78 million to $93 million. According to the bankers' valuation, the expected market cap after the IPO is from 336 billion won to 399 billion won. The book building for the institutional investors starts on 2 August 2021.</p><table class="table table-striped">
<colgroup>
<col>
<col>
</colgroup>
<tbody>
<tr>
<td style="width: 238pt;"><div>Deal Specifics of the Aju Steel IPO:</div></td>
<td style="width: 282pt;"> </td>
</tr>
<tr>
<td>Lead underwriters of the IPO: </td>
<td style="width: 282pt;">Mirae Asset Securities</td>
</tr>
<tr>
<td>Expected IPO price per share: </td>
<td style="width: 282pt;">12,700 won (low)/15,100 won (high)</td>
</tr>
<tr>
<td>Number of Shares for IPO:</td>
<td style="width: 282pt;">6.94m shares (4m new shares and 2.94m old shares)</td>
</tr>
<tr>
<td>IPO base deal size: </td>
<td style="width: 282pt;">US$78 mn (low);  US$93 mn (high)</td>
</tr>
<tr>
<td>Expected common shares outstanding, fully diluted (post-IPO):  </td>
<td style="width: 282pt;">26.45m shares</td>
</tr>
<tr>
<td>Expected market cap after IPO:</td>
<td style="width: 282pt;">336 billion won (low)/399 billion won (high)</td>
</tr>
<tr>
<td>Book open: </td>
<td style="text-align: left; width: 282pt;">2-Aug-21</td>
</tr>
<tr>
<td>Book closed:</td>
<td style="text-align: left; width: 282pt;">3-Aug-21</td>
</tr>
<tr>
<td>Listing date: </td>
<td style="text-align: left; width: 282pt;">TBD</td>
</tr>
<tr>
<td>Source: Company data</td>
<td style="width: 282pt;"> </td>
</tr>
</tbody>
</table><p><strong>Major Shareholders</strong> - The major shareholders of the company include the founder Lee Hak-Yeon (35.9%), Yoon Mi-Sook (16.3%) - wife of the founder Lee Hak-Yeon. </p>

Founded in 1995, Aju Steel specializes in producing color steel sheets. Color steel sheet is a high value-added material that has improved durability and functionality by processing the surface of steel to realize various colors and patterns. The company's color steel sheet products are mainly applied to premium home appliances and building interior and exterior materials where design is important. The IPO price range of Aju Steel is from 12,700 won to 15,100 won. The IPO deal size is $78 million to $93 million. According to the bankers' valuation, the expected market cap after the IPO is from 336 billion won to 399 billion won. The book building for the institutional investors starts on 2 August 2021.






Deal Specifics of the Aju Steel IPO:
 


Lead underwriters of the IPO: 
Mirae Asset Securities


Expected IPO price per share: 
12,700 won (low)/15,100 won (high)


Number of Shares for IPO:
6.94m shares (4m new shares and 2.94m old shares)


IPO base deal size: 
US$78 mn (low);  US$93 mn (high)


Expected common shares outstanding, fully diluted (post-IPO):  
26.45m shares


Expected market cap after IPO:
336 billion won (low)/399 billion won (high)


Book open: 
2-Aug-21


Book closed:
3-Aug-21


Listing date: 
TBD


Source: Company data
 


Major Shareholders - The major shareholders of the company include the founder Lee Hak-Yeon (35.9%), Yoon Mi-Sook (16.3%) - wife of the founder Lee Hak-Yeon. 

South Korea

POSCO manufactures various types of steel products.  The Company produces hot rolled steel, cold rolled steel, stainless steel, and other forms of steel. The products are mainly used for automobile, construction, and shipbuilding industries.

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Posco ADR (PKX US)

Korea ADRs at a Substantial Price Disparity: Watch LG Display & POSCO

Korea's ADRs listed on NYSE are currently at a substantial price disparity to their respective underlying shares. This post discusses how to...

Sanghyun Park

Screening for GEMs: August 2021

This insight provides an overview of our, machine learning-driven, proprietary GEM screening model, based on a Multifactor model, a Deep Neural...

Wium Malan, CFA

SGX Asia Currencies and Commodities Insights

By Macro Hive SGX Asia Currencies Insights Yuan risks escalate with China’s ongoing regulatory overhaul. Indian tech IPOs expected to...

Singapore Exchange Ltd (SGX)

Aju Steel IPO Valuation Analysis

Our base case valuation of Aju Steel is target price of 14,240 won per share, which would represent just 2% above the mid-point of the IPO price...

Douglas Kim

Aju Steel IPO Preview

The IPO price range of Aju Steel is from 12,700 won to 15,100 won. The IPO deal size is $78 million to $93 million. The expected market cap after...

Douglas Kim

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