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

What would be a real-world passive money size tracking KOSPI 200?My latest estimation is ₩80 trillion, and here is a breakdown of my estimation.ETFsWe currently have 17 local ETFs mirroring KOSPI 200, including KODEX 200 (₩5.5T) and TIGER 200 (₩2.3T). Their combined market value amounts to ₩16.5T.







Local ETFs directly mirroring KOSPI 200
Ticker
Market cap as of today (June 1, 2021)


YURIE TREX 200 ETF
108590
₩13.0B


Kiwoom KOSEF200 Total Return ETF
294400
₩493.3B


Kyobo AXA Power K200 ETF
152870
₩28.6B


Samsung KODEX 200 Total Return ETF
278530
₩1,470.5B


Mirae Asset TIGER Leverage ETF
123320
₩32.1B


KIM KINDEX Leverage ETF
152500
₩11.1B


HANWHA Arirang 200 ETF
152100
₩853.6B


Samsung KODEX 200 ETF
069500
₩5,446.8B


Kiwoom KOSEF200 ETF
069660
₩542.8B


Mirae Asset TIGER200 ETF
102110
₩2,283.6B


KIM KINDEX 200 ETF
105190
₩751.7B


Samsung KODEX Leverage Derivatives ETF
122630
₩1,722.2B


KB KBSTAR 200 Securities ETF
148020
₩1,168.8B


NH-Amundi HANARO 200 ETF
293180
₩655.5B


NH-Amundi HANARO 200TR ETF
332930
₩222.4B


KIM KINDEX 200TotalReturn ETF
332500
₩340.5B


Shinhan SMART 200 Total Return ETF
295040
₩449.9B


- Total
-
₩16,486.4B

Source: KRX

Index funds39 local index funds are currently tracking KOSPI 200, including the Kyobo AXA Power Index with an AUM of ₩1.3T. Their combined AUM totals ₩3.7T.






Local Index funds directly mirroring KOSPI 200
Assets under management as of today (June 1, 2021)


Kiwoom New Frontier Index Plus αF- 1 [Equity-Derivative] A1
₩17.5B


Kiwoom e-Alpha Index 1 [Equity]
₩11.0B


Kiwoom Korea Index 1 [Equity] C-e
₩28.1B


Kiwoom Korea Happy Pension Index 1 [Equity]
₩16.6B


Korea Investment Index Plus 1 [Equity-Derivative] (A)
₩28.4B


BNKK200 Index (Equity-Derivative) ClassA
₩25.4B


KB Star Power Index Korea [Equity-Derivative] C-E
₩18.3B


Hungkuk Index Alpha [Equity-Derivative] C-f
₩17.9B


Daishin Index Value [Equity] ClassC-F
₩130.5B


Mirae Asset Market Plus [Equity] Type F
₩11.8B


Consus Moebius 1 200 Index (Equity-Derivative) Class C
₩11.0B


IBKKOSPI200 Index 1 [Equity] Type A
₩39.8B


Truston Index Alpha s [Equity-Derivative] C
₩14.5B


Hyundai KOSPI 200 Index Type C-f
₩10.2B


DGB Index Plus 1 [Equity-Derivative] A
₩27.6B


Woori KOSPI200 Index 1 (Equity-Derivative) ClassC-e
₩49.1B


Kyobo AXA Power Index 2 [Equity] ClassA1
₩22.5B


East Spring Korea Index [Equity] Class C-F
₩207.0B


Mirae KOSPI 200 Index 1 [Equity] Type C-e
₩164.0B


Kyobo AXA Power Index 1 [Equity] Class A 1
₩332.0B


Kyobo AXA Power Index 3 [Equity] ClassA
₩12.6B


Daishin KOSPI200 Index [Equity-Derivative] ClassC1
₩64.1B


Kyobo AXA Power Index 1 (Equity-Derivative) ClassA
₩1,277.0B


DB Index Haeohreum Alpha [Equity-Derivative] ClassA
₩15.5B


Hana UBS Umbrella New Index K- 1 [Equity-Derivative] ClassC
₩12.9B


Samsung Retirement Pension Index 1 [Equity] C
₩138.7B


Korea Investment &amp; Cruise F2.8 Index [Equity] (A)
₩14.1B


KB Index Annuity [Equity] C
₩20.6B


Samsung Index Alpha 1 [Equity-Derivative] (A)
₩18.6B


Samsung Pension Korea Index [Equity-Derivative]
₩34.6B


Samsung Classic Index Pensions 1 [Equity] _C
₩180.6B


KB Star Korea Index [Equity] C-E class
₩88.8B


Samsung Premium Index A [Equity-Derivative]
₩74.2B


Hanwha Smart ++ Index [Equity] C / C2β
₩240.4B


Feynman Index Premium 2 [Equity-Derivative]
₩18.8B


Samsung Index Plus 1 [Equity-Derivative] (C 1)
₩49.7B


KB Star Korea Index [Equity-Derivative] C
₩54.1B


NH-Amundi Premier Index [Equity-Derivative] ClassA
₩26.7B


Hyundai Investment Index 1 Alpha [Equity-Derivative] C-I
₩135.5B


- Total
₩3,660.7B

Source: KG Zeroin

National Pension Service (NPS)Now, we need to add NPS. In 2019, the internal (direct) management accounted for 54.15% of the domestic equity, whereas the external (consignment) management was responsible for 45.85%. Only the internal management operates passive funds, which accounted for 33.75% of the total domestic equity.The total domestic equity at March-end of this year was ₩178.7T. Assuming the same 33.75% weight for the passive in the domestic equity churns out ₩60.3T for the local passive funds within the NPS. An assumed 70% of this ₩60.3T would be ₩42.2T, supposedly tracking KOSPI 200. 70% should be a conservative assumption as their BM index for domestic equity is KOSPI.









NPS asset allocation
FY2019, amount
FY2019, weight
FY2021 March, amount
Directly mirroring KOSPI 200 at an assumed 70% of the total passive funds


Internal (direct) management
₩71,612.1B





- Active
₩26,976.9B
20.40%




- Passive
₩44,635.2B
33.75%
₩60,301.4B
₩42,211.0B


External (consignment) management
₩60,641.9B





- Active
₩60,641.9B
45.85%




- Passive
₩0.0B
0.00%




Total domestic Equity
₩132,254.0B

₩178,673.0B


Source: NPS

Variable insurance index fundsLastly, we have variable insurance index funds. A vast majority of the local variable insurance index funds are tracking KOSPI 200. I don't have the latest figure, but the FY2019 year-end data (compiled by YONHAP INFOMAX) shows that the combined AUM of these funds amounted to about ₩17~18T.Given the relatively flat yearly growth among the local insurance companies, I don't expect to see a substantial change in the combined AUM last year. So, ₩18T would be a safe estimate.Adding all four spits out ₩80.4T, supposedly total local passive money mirroring KOSPI 200 at this point.
₩80T estimation breakdown

ETFs
₩16.5T


Index funds
₩3.7T


National Pension Service - Passive
₩42.2T


Variable Insurance Index funds
₩18.0T


 - Total
₩80.4T

Source: KG Zeroin, KRX, NPS, &amp; YONHAP INFOMAX


Why I Estimate Total Local Passive Money Tracking KOSPI 200 at ₩80T? Here Is a Breakdown

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<div class="content-highlight">
<p>KRX announced today after the market close the changes in the constituents for KOSPI 200, KOSDAQ 150, and KRX 300 indices. There were 5 stocks that were added and 7 stocks that were deleted in KOSPI 200. As a result of the being included in the KOSPI 200, the five new additions will be subject to potential short selling. These five stocks have done really well in the past few months and some investors could be taking some short positions on them. </p>
<p>We have also provided the impact of the additions and deletions of KOSPI 200 on their share prices post the announcements in November 2020 and May 2020 in terms of 20 trading days after the KOSPI 200 rebalance announcement dates. </p>
<p>Although the November 2020 rebalance showed the additions far outperforming the deletions (20 trading days after announcement date), this trend reversed in the May 2020 rebalance. These data points suggest lack of a definitive conclusion on taking long/short position post the announcement date. In addition, the regulators have allowed shorting for only the stocks included in KOSPI 200 and KOSDAQ 150, making it even more difficult to short stocks that are excluded from these indices.</p>
</div>


KRX announced today after the market close the changes in the constituents for KOSPI 200, KOSDAQ 150, and KRX 300 indices. There were 5 stocks that were added and 7 stocks that were deleted in KOSPI 200. As a result of the being included in the KOSPI 200, the five new additions will be subject to potential short selling. These five stocks have done really well in the past few months and some investors could be taking some short positions on them. 
We have also provided the impact of the additions and deletions of KOSPI 200 on their share prices post the announcements in November 2020 and May 2020 in terms of 20 trading days after the KOSPI 200 rebalance announcement dates. 
Although the November 2020 rebalance showed the additions far outperforming the deletions (20 trading days after announcement date), this trend reversed in the May 2020 rebalance. These data points suggest lack of a definitive conclusion on taking long/short position post the announcement date. In addition, the regulators have allowed shorting for only the stocks included in KOSPI 200 and KOSDAQ 150, making it even more difficult to short stocks that are excluded from these indices.


KOSPI 200, KOSDAQ 150, & KRX 300 Indices Rebalance Changes - May 2021

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

<p>The KRX has announced the list of inclusions and exclusions to 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> today. The rebalance is effective after the close of trading on 10 June.</p><p>There are 5 inclusions and 7 exclusions at the June 2021 review. If <a href="https://www.smartkarma.com/entities/sk-ie-technology" target="_blank" data-smartkarma-citation="entities:29207:1" rel="noopener">SK IE Technology (361610 KS)</a> meets the criteria for index Fast Entry, then <a href="https://www.smartkarma.com/entities/hdc-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:7699:1" rel="noopener">HDC Holdings (012630 KS)</a> will be deleted and the announcement will be made on 2 June.</p><p>So, there could be a total of 6 inclusions and 8 exclusions at the review with a one-way turnover of 0.77%.</p><p>The inclusions and exclusions are:</p><table class="table table-striped">
<colgroup>
<col>
<col>
<col>
<col>
</colgroup>
<tbody>
<tr>
<td colspan="2" style="text-align: center; width: 222pt;"><h3>Inclusions</h3></td>
<td colspan="2" style="text-align: center; width: 273pt;"><h3>Exclusions</h3></td>
</tr>
<tr>
<td><strong>Code</strong></td>
<td><strong>Name</strong></td>
<td><strong>Code</strong></td>
<td><strong>Name</strong></td>
</tr>
<tr>
<td>302440.KS</td>
<td>SK Bioscience Co Ltd</td>
<td>005180.KS</td>
<td>Binggrae Co Ltd</td>
</tr>
<tr>
<td>006040.KS</td>
<td>Dongwon Industries Co Ltd</td>
<td>005610.KS</td>
<td>SPC Samlip Co Ltd</td>
</tr>
<tr>
<td>298050.KS</td>
<td>Hyosung Advanced Materials Corp</td>
<td>006390.KS</td>
<td>Hanil Hyundai Cement Co Ltd</td>
</tr>
<tr>
<td>298020.KS</td>
<td>Hyosung TNC Corp</td>
<td>008350.KS</td>
<td>Namsun Aluminium Co Ltd</td>
</tr>
<tr>
<td><em><strong>361610.KS</strong></em></td>
<td><em><strong>SK IE Technology Co Ltd</strong></em></td>
<td>009410.KS</td>
<td>Taeyoung Engineering &amp; Construction Co Ltd</td>
</tr>
<tr>
<td>001440.KS</td>
<td>Taihan Electric Wire Co Ltd</td>
<td>018250.KS</td>
<td>Aekyung Industrial Co Ltd</td>
</tr>
<tr>
<td></td>
<td></td>
<td>145990.KS</td>
<td>Samyang Corp</td>
</tr>
<tr>
<td></td>
<td></td>
<td><em><strong>012630.KS</strong></em></td>
<td><em><strong>HDC Holdings Co Ltd</strong></em></td>
</tr>
</tbody>
</table><p>There are 12 trading days to implementation of the changes and there are a lot of deletions that have over 1 day of ADV to trade. The impact on the inclusions is smaller but there will be a lot of active funds looking to buy the stocks so they don't deviate too much from their benchmark.</p><p>With short selling limited to the constituents of 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>, shorting the inclusions will be tough while selling/shorting the deletions is a lot easier since they are current index constituents. The inclusions could outperform the deletions till a couple of days before implementation date, while there could be a high risk/reward reverse trade if the outperformance is significant.</p>

The KRX has announced the list of inclusions and exclusions to the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) today. The rebalance is effective after the close of trading on 10 June.There are 5 inclusions and 7 exclusions at the June 2021 review. If SK IE Technology (361610 KS) meets the criteria for index Fast Entry, then HDC Holdings (012630 KS) will be deleted and the announcement will be made on 2 June.So, there could be a total of 6 inclusions and 8 exclusions at the review with a one-way turnover of 0.77%.The inclusions and exclusions are:








Inclusions
Exclusions


Code
Name
Code
Name


302440.KS
SK Bioscience Co Ltd
005180.KS
Binggrae Co Ltd


006040.KS
Dongwon Industries Co Ltd
005610.KS
SPC Samlip Co Ltd


298050.KS
Hyosung Advanced Materials Corp
006390.KS
Hanil Hyundai Cement Co Ltd


298020.KS
Hyosung TNC Corp
008350.KS
Namsun Aluminium Co Ltd


361610.KS
SK IE Technology Co Ltd
009410.KS
Taeyoung Engineering &amp; Construction Co Ltd


001440.KS
Taihan Electric Wire Co Ltd
018250.KS
Aekyung Industrial Co Ltd




145990.KS
Samyang Corp




012630.KS
HDC Holdings Co Ltd


There are 12 trading days to implementation of the changes and there are a lot of deletions that have over 1 day of ADV to trade. The impact on the inclusions is smaller but there will be a lot of active funds looking to buy the stocks so they don't deviate too much from their benchmark.With short selling limited to the constituents of the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX), shorting the inclusions will be tough while selling/shorting the deletions is a lot easier since they are current index constituents. The inclusions could outperform the deletions till a couple of days before implementation date, while there could be a high risk/reward reverse trade if the outperformance is significant.

Hyosung Advanced Materials / Event-Driven

AnnouncementThe KRX has just announced the results of the KOSPI 200 semi-annual rebalancing. The KRX will reflect the changes in the index calculation at the close of June 10. 5 in total newly make KOSPI 200, while 7 names leave the index.
LX Holdings (383800 KS) will be added to the index on May 28 and remain in KOSPI 200 after June 11.
SK IE Technology (361610 KS) will be added to the index on June 11 if it meets the fast-entry conditions. In such a case, HDC (012630 KS) will be deleted. KRX will officially announce it on June 2.









KOSPI 200 additions
Ticker
KOSPI 200 deletions
Ticker


Hyosung Advanced Materials Corp
298050
Tae Young Engineering&amp;Constructin Co Ltd
009410


Taihan Electric Wire Co Ltd
001440
Namsun Aluminum Co Ltd
008350


Hyosung TNC Corp
298020
Binggrae Co Ltd
005180


Dongwon Industries Co., Ltd
006040
Hanil Hyundai Cement Co Ltd
006390


SK Bioscience Co Ltd
302440
Samyang Corp
145990




SPC Samlip Co Ltd
005610




Aekyung Industrial Co Ltd
018250

Source: KRX

Passive flow estimationSK Bioscience will enjoy the largest passive inflow estimated at ₩179.8B. But Dongwon Industries will face the biggest impact as its estimated passive inflow takes 11.65 days to buy. The other 4 additions need less than 2 days to buy.








KOSPI 200 adds - passive inflow
Ticker
Estimated passive inflow
Days to buy


Hyosung Advanced Materials Corp
298050
₩40.2B
1.09x


Taihan Electric Wire Co Ltd
001440
₩29.3B
1.63x


Hyosung TNC Corp
298020
₩57.3B
0.83x


Dongwon Industries Co., Ltd
006040
₩16.9B
11.65x


SK Bioscience Co Ltd
302440
₩179.8B
1.02x

Source: KRX &amp; FnGuide

Namsun Aluminum will lose the largest passive money estimated at ₩28.3B, requiring 2.43 days to cover. But Binggrae will likely encounter the harshest impact, requiring 6.10 days to cover.








KOSPI 200 deletes - passive outflow
Ticker
Estimated passive outflow
Days to cover


Tae Young Engineering&amp;Constructin Co Ltd
009410
₩14.5B
2.54x


Namsun Aluminum Co Ltd
008350
₩28.3B
2.43x


Binggrae Co Ltd
005180
₩22.3B
6.10x


Hanil Hyundai Cement Co Ltd
006390
₩6.5B
2.67x


Samyang Corp
145990
₩7.2B
2.01x


SPC Samlip Co Ltd
005610
₩7.3B
0.46x


Aekyung Industrial Co Ltd
018250
₩20.8B
1.90x

Source: KRX &amp; FnGuide

Price performanceAll of the additions have had a decent rally as they move into the rebalancing date. Hyosung Advanced Materials had a bit of correction of late, though.The deletions have had mostly a strong performance on a year-to-date basis. But everyone had a downward correction in the recent days, probably due to the index rebalancing. Short interestI don't see a heavy short interest in any of the deletes yet. Namsun Aluminum has the highest short interest to float shares ratio at 3.33%, which is still 1.16 days to cover. But that doesn't mean that short-sellers aren't waiting on these deletes. Everyone carries a pretty heavy loan balance. As for Binggare, the loan balance is 8 times its 30-day average daily trade volume, leaving the most substantial room for new short positions. 











KOSPI 200 deletes - short interest
Ticker
Short interest to float shares
Days to cover
Loan balance to float shares
Loan balance to ADTV
30-day average daily trade value


Tae Young Engineering&amp;Constructin Co Ltd
009410
1.05%
0.44x
6.86%
2.89x
₩5.7B


Namsun Aluminum Co Ltd
008350
3.33%
1.16x
7.26%
2.53x
₩11.7B


Binggrae Co Ltd
005180
1.19%
1.26x
7.51%
8.01x
₩3.7B


Hanil Hyundai Cement Co Ltd
006390
1.08%
0.35x
8.67%
2.79x
₩2.4B


Samyang Corp
145990
1.59%
0.58x
10.47%
3.85x
₩3.6B


SPC Samlip Co Ltd
005610
0.76%
0.16x
14.46%
2.95x
₩3.4B


Aekyung Industrial Co Ltd
018250
0.84%
0.45x
5.86%
3.11x
₩4.2B

Source: KRX



KOSPI 200 Rebalancing: Changes, Passive Flow, & Trade Approach

Equity Capital Markets

<div class="content-highlight"><p>Our base case valuation of SD Biosensor is 82,021 won, which is 4% lower than the high end of the IPO price range of 85,000 won. Given the lack of upside, we would pass on this IPO. Our base case valuation also represents an implied market cap of 8.6 trillion won, which is based on 15.4x P/E using our estimated net profit of 560 billion won in 2022. Our P/E multiple of 15.4x assumes a 50% premium to <a href="https://www.smartkarma.com/entities/seegene-inc" target="_blank" data-smartkarma-citation="entities:11483:1" rel="noopener">Seegene Inc (096530 KS)</a>'s P/E multiple next year. </p></div><p>We have used only Seegene as a comp to SD Biosensor. We have chosen to exclude other companies such as Thermo Fisher Scientific and Perkin Elmer which the bankers included in their valuation assessment. We do not believe these latter two US based companies are appropriate comps to SD Biosensor mainly because SD Biosensor has only a couple of years of sizable sales and profits whereas Thermo Fisher Scientific and Perkin Elmer have many decades of generating billion dollar plus in sales. </p>

Our base case valuation of SD Biosensor is 82,021 won, which is 4% lower than the high end of the IPO price range of 85,000 won. Given the lack of upside, we would pass on this IPO. Our base case valuation also represents an implied market cap of 8.6 trillion won, which is based on 15.4x P/E using our estimated net profit of 560 billion won in 2022. Our P/E multiple of 15.4x assumes a 50% premium to Seegene Inc (096530 KS)'s P/E multiple next year. We have used only Seegene as a comp to SD Biosensor. We have chosen to exclude other companies such as Thermo Fisher Scientific and Perkin Elmer which the bankers included in their valuation assessment. We do not believe these latter two US based companies are appropriate comps to SD Biosensor mainly because SD Biosensor has only a couple of years of sizable sales and profits whereas Thermo Fisher Scientific and Perkin Elmer have many decades of generating billion dollar plus in sales. 

South Korea

SK Bioscience Co.,Ltd. operates biopharmaceutical businesses. The Company produces vaccines, sky cellflu prefilled syringes, sky cellflu quadrivalent prefilled syringes, varicella drugs, and other related products. SK Bioscience markets its products throughout South Korea.

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SK Bioscience (302440 KS)

Why I Estimate Total Local Passive Money Tracking KOSPI 200 at ₩80T? Here Is a Breakdown

This post provides a detailed breakdown of how I arrive at an estimated ₩80 trillion for the passive money tracking KOSPI 200.

Sanghyun Park

KOSPI 200, KOSDAQ 150, & KRX 300 Indices Rebalance Changes - May 2021

In this insight, we discuss the implications of the additions and deletions of KOSPI 200, KOSDAQ 150, & KRX 300 on the Korean stock market.

Douglas Kim

KOSPI200 Index Rebalance: Spot On!

There are 5 adds and 7 deletes for the KOSPI200 (as we forecast). There could be another add/delete if SK IE Tech gets index Fast Entry. Inclusions...

Brian Freitas

KOSPI 200 Rebalancing: Changes, Passive Flow, & Trade Approach

The KRX has just announced the results of the KOSPI 200 semi-annual rebalancing. This post examines the passive flow of the adds and deletes as...

Sanghyun Park

SD Biosensor IPO Valuation Analysis

Our base case valuation of SD Biosensor is 82,021 won, which is 4% lower than the high end of the IPO price range of 85,000 won. Given the lack of...

Douglas Kim

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