Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<ul>
<li>The reduction of credit loans by Korea Investment &amp; Securities and Kiwoom Securities in the past week may have accelerated unwinding of positions of 8 stocks related to CFD selling.  </li>
<li>The balance of credit loans for KOSPI increased 12.7% YTD. On the other hand, the balance of credit loans for KOSDAQ increased by 36.1% YTD. </li>
<li>As local securities companies further reduce credit loans and regulators also restrict CFD related leverage, a sound pair trade could be to go long KOSPI 200 and short KOSDAQ 150. </li>
</ul>


The reduction of credit loans by Korea Investment &amp; Securities and Kiwoom Securities in the past week may have accelerated unwinding of positions of 8 stocks related to CFD selling.  
The balance of credit loans for KOSPI increased 12.7% YTD. On the other hand, the balance of credit loans for KOSDAQ increased by 36.1% YTD. 
As local securities companies further reduce credit loans and regulators also restrict CFD related leverage, a sound pair trade could be to go long KOSPI 200 and short KOSDAQ 150. 


Korea Investment & Securities' Suspension of Credit Loans for Stock Purchases - The Trigger Event?

Equity Bottom-Up

<ul>
<li>The biggest story in the Korean stock market in the past three days has been the crash in 8 stocks related to CFD derivatives.</li>
<li>As a result of the CFD related margin call selling, the following are the major impact on the 8 related stocks and the overall Korean stock market in our view.</li>
<li>They include a) overshooting on the downside on 8 related names, b) negative impact on the major rechargeable battery names, and c) negative impact on the overall Korean stock market. </li>
</ul>


The biggest story in the Korean stock market in the past three days has been the crash in 8 stocks related to CFD derivatives.
As a result of the CFD related margin call selling, the following are the major impact on the 8 related stocks and the overall Korean stock market in our view.
They include a) overshooting on the downside on 8 related names, b) negative impact on the major rechargeable battery names, and c) negative impact on the overall Korean stock market. 


A Crash in 8 Korean Stocks Related to CFD Derivatives: Margin Call in Korea

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.

<ul>
<li>The local ghost hedge fund began to excessively invest in credit, which leveraged 2.5 to 3 times when the eight manipulated stocks started to increase rapidly in price.</li>
<li>Then, the Financial Supervisory Service deemed this excessively-leveraged trading behavior as unusual, and news of an investigation into their activities broke out and triggered them to dump the shares.</li>
<li>The key now is identifying in advance the stocks that will experience similar selling patterns. To do so, we need to prioritize selecting stocks with high-margin balances in recent times.</li>
</ul>


The local ghost hedge fund began to excessively invest in credit, which leveraged 2.5 to 3 times when the eight manipulated stocks started to increase rapidly in price.
Then, the Financial Supervisory Service deemed this excessively-leveraged trading behavior as unusual, and news of an investigation into their activities broke out and triggered them to dump the shares.
The key now is identifying in advance the stocks that will experience similar selling patterns. To do so, we need to prioritize selecting stocks with high-margin balances in recent times.


Matched Order Fraud in Korea: Reason Behind Eight Stocks Hit Massively

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

<ul>
<li>There are 5 migrations from MidCap to LargeCap, 4 LargeCap to MidCap, 3 new additions to MidCap, 9 SmallCap to MidCap, 11 MidCap to SmallCap, 3 new additions to SmallCap.</li>
<li>The migrations from SmallCap to MidCap have outperformed the stocks migrating between other segments by a huge margin over the last few months.</li>
<li>Given the huge outperformance and looking at how the migrations have performed historically, we'd expect the stocks migrating to MidCap to underperform post implementation of the changes.</li>
</ul>


There are 5 migrations from MidCap to LargeCap, 4 LargeCap to MidCap, 3 new additions to MidCap, 9 SmallCap to MidCap, 11 MidCap to SmallCap, 3 new additions to SmallCap.
The migrations from SmallCap to MidCap have outperformed the stocks migrating between other segments by a huge margin over the last few months.
Given the huge outperformance and looking at how the migrations have performed historically, we'd expect the stocks migrating to MidCap to underperform post implementation of the changes.


KOSPI Size Indices - Changes in March & Implications

<ul>
<li>The review period for the March rebalance of the KOSPI Size Indices ends 28 February. The results will be announced early March and implemented at the close on 9 March.</li>
<li>We see 5 migrations between MidCap and LargeCap, 8 migrations from SmallCap to MidCap, 3 new adds to MidCap, and 11 migrations from MidCap to SmallCap.</li>
<li>Stocks migrating from SmallCap to MidCap have outperformed stocks that are migrating between other categories.</li>
</ul>


The review period for the March rebalance of the KOSPI Size Indices ends 28 February. The results will be announced early March and implemented at the close on 9 March.
We see 5 migrations between MidCap and LargeCap, 8 migrations from SmallCap to MidCap, 3 new adds to MidCap, and 11 migrations from MidCap to SmallCap.
Stocks migrating from SmallCap to MidCap have outperformed stocks that are migrating between other categories.


KOSPI Size Indices - Potential Changes in March

South Korea

Sebang Co., Ltd. provides inland transportation services specializing in carrying containers and bulk cargos.  The Company also offers stevedoring services along with container storage services in the local ports.  Sebang also operates construction business and manufactures battery parts including separators and containers.

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Sebang Co Ltd (004360 KS)

Korea Investment & Securities' Suspension of Credit Loans for Stock Purchases - The Trigger Event?

The reduction of credit loans by Korea Investment & Securities and Kiwoom Securities in the past week may have accelerated unwinding of positions...

Douglas Kim

Matched Order Fraud in Korea: Reason Behind Eight Stocks Hit Massively

This post investigates and explains the matched order fraud incident that engulfed Korea's local stock market this week and the potential names...

Sanghyun Park

KOSPI Size Indices - Changes in March & Implications

The changes to the KOSPI Size Indices were announced on Friday. Stocks migrating from SmallCap to MidCap have bigly outperformed and going by...

Brian Freitas

KOSPI Size Indices - Potential Changes in March

The review period for the March rebal of the KOSPI Size Indices ends on 28 February. We see quite a lot of potential migrations. Some stocks could...

Brian Freitas

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52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Korea Investment & Securities' Suspension of Credit Loans for Stock Purchases - The Trigger Event?

The reduction of credit loans by Korea Investment & Securities and Kiwoom Securities in the past week may have accelerated unwinding of positions...

Douglas Kim

A Crash in 8 Korean Stocks Related to CFD Derivatives: Margin Call in Korea

The biggest story in the Korean stock market in the past three days has been the crash in 8 stocks related to CFD derivatives. We discuss the major...

Douglas Kim

Matched Order Fraud in Korea: Reason Behind Eight Stocks Hit Massively

This post investigates and explains the matched order fraud incident that engulfed Korea's local stock market this week and the potential names...

Sanghyun Park

KOSPI Size Indices - Changes in March & Implications

The changes to the KOSPI Size Indices were announced on Friday. Stocks migrating from SmallCap to MidCap have bigly outperformed and going by...

Brian Freitas

KOSPI Size Indices - Potential Changes in March

The review period for the March rebal of the KOSPI Size Indices ends on 28 February. We see quite a lot of potential migrations. Some stocks could...

Brian Freitas