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

Event-Driven

<ul>
<li>The KRX announced the 100 constituents of the much-awaited Korea Value-Up Index on 24 September. There were hits and misses but broad consensus was that the index is a miss.</li>
<li>Following market feedback, the KRX could conduct a special rebalance of the index in December. But this could be after the launch of ETFs tracking the index.</li>
<li>With a big overlap and similar characteristics as the <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">KOSPI 200 Index</a>, there could be limited assets benchmarked to the Korea Value-Up Index in the short-term.</li>
</ul>


The KRX announced the 100 constituents of the much-awaited Korea Value-Up Index on 24 September. There were hits and misses but broad consensus was that the index is a miss.
Following market feedback, the KRX could conduct a special rebalance of the index in December. But this could be after the launch of ETFs tracking the index.
With a big overlap and similar characteristics as the KOSPI 200 Index, there could be limited assets benchmarked to the Korea Value-Up Index in the short-term.


Korea Value-Up Index: Estimated Passive Flows as ETF Launches Coming

Korea Stock Exchange KOSPI 200 / Event-Driven

<ul>
<li>Since short selling was banned in November 2023, short interest has plunged in Korea as shorts were covered. Markets have not done much over the last 16 months though. </li>
<li>Foreign investor holdings have dropped from 32.05% in July to 28.57%. The top 25 stocks bought by foreign investors outperformed the top 25 stocks sold by 128% in 16 months.</li>
<li>There will be trade opportunities across indices, pref/ords, index migrations and deletions, potential market upgrades and overvalued stocks being sold.</li>
</ul>


Since short selling was banned in November 2023, short interest has plunged in Korea as shorts were covered. Markets have not done much over the last 16 months though. 
Foreign investor holdings have dropped from 32.05% in July to 28.57%. The top 25 stocks bought by foreign investors outperformed the top 25 stocks sold by 128% in 16 months.
There will be trade opportunities across indices, pref/ords, index migrations and deletions, potential market upgrades and overvalued stocks being sold.


Korea: Short Selling Is Back in March; Trade Ideas

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Douglas Research Advisory

Equity Bottom-Up

<ul>
<li>Among the various industries, the banking sector could be negatively impacted if Lee Jae-Myung becomes the next President of Korea.</li>
<li>Lee Jae-Myung has pledged providing a "basic loan" of 10 million won per citizen which is likely to negatively impact the Korean banks since it lacks rigorous credit checks. </li>
<li>There is an increasing likelihood that Lee Jae-Myung could raise the pressure on local banks to share the responsibility of social policies by contributing more money to support them.</li>
</ul>


Among the various industries, the banking sector could be negatively impacted if Lee Jae-Myung becomes the next President of Korea.
Lee Jae-Myung has pledged providing a "basic loan" of 10 million won per citizen which is likely to negatively impact the Korean banks since it lacks rigorous credit checks. 
There is an increasing likelihood that Lee Jae-Myung could raise the pressure on local banks to share the responsibility of social policies by contributing more money to support them.


Lee Jae-Myung's Policies Likely to Negatively Impact Korean Banks

<ul>
<li>Shinhan Financial announced that it plans to increase shareholder return ratio to 50%, improve ROE to 10%, and reduce outstanding shares by 50 million+ by 2027.</li>
<li>Shinhan Financial Group's new, outstanding shareholder return policy has been one of the most impressive since the roll-out of the Corporate Value Up program in Korea a few weeks ago.</li>
<li>The improved corporate governance policy is likely to lead to Shinhan Financial Group outperforming other financial stocks in Korea and KOSPI overall in the next 6-12 months. </li>
</ul>


Shinhan Financial announced that it plans to increase shareholder return ratio to 50%, improve ROE to 10%, and reduce outstanding shares by 50 million+ by 2027.
Shinhan Financial Group's new, outstanding shareholder return policy has been one of the most impressive since the roll-out of the Corporate Value Up program in Korea a few weeks ago.
The improved corporate governance policy is likely to lead to Shinhan Financial Group outperforming other financial stocks in Korea and KOSPI overall in the next 6-12 months. 


Shinhan Financial: Shareholder Return Ratio of 50% to Boost Corporate Value

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 index focuses on qualitative factors like capital efficiency and shareholder returns, but efforts to impose sector balance may have overextended its market benchmark role.</li>
<li>Some companies not fitting the 'value-up' narrative got included, while market favorites were sidelined by sector rankings, which is puzzling given the index's original goal.</li>
<li>Still, with rebalancing cut down to once a year, we should expect the flow impact on the index names to hit harder than initially thought compared to their sector peers.</li>
</ul>


The index focuses on qualitative factors like capital efficiency and shareholder returns, but efforts to impose sector balance may have overextended its market benchmark role.
Some companies not fitting the 'value-up' narrative got included, while market favorites were sidelined by sector rankings, which is puzzling given the index's original goal.
Still, with rebalancing cut down to once a year, we should expect the flow impact on the index names to hit harder than initially thought compared to their sector peers.


All the Scoop on the Korea Value-Up Index

South Korea

Shinhan Financial Group Co., Ltd., a holding company, provides a full range of consumer and commercial banking-related financial services.  The company's main businesses include banking, securities brokerage, trust banking, and assets management to individuals, businesses, and other financial institutions.

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Shinhan Financial (055550 KS)

Korea Value-Up Index: Estimated Passive Flows as ETF Launches Coming

The Korea Value-Up Index is very similar to the KOSPI200 Index. That could mean not a lot of passive assets tracking the index. Stocks with the...

Brian Freitas

Korea: Short Selling Is Back in March; Trade Ideas

Short selling in Korea commences from Monday. There will be a lot of interest in shorting stocks/sectors depending on how they have performed since...

Brian Freitas

Lee Jae-Myung's Policies Likely to Negatively Impact Korean Banks

Among the various industries, the banking sector could be negatively impacted if Lee Jae-Myung becomes the next President of Korea.

Douglas Kim

Shinhan Financial: Shareholder Return Ratio of 50% to Boost Corporate Value

Shinhan Financial announced that it plans to increase shareholder return ratio to 50%, improve ROE to 10%, and reduce outstanding shares by 50...

Douglas Kim

All the Scoop on the Korea Value-Up Index

This post breaks down everything we need to know about the Korea Value-up Index that KRX just unveiled today, especially focusing on those...

Sanghyun Park

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