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>Samsung SDI and LG Chem are expected to be newly included in the index, while Hana Financial and KT&amp;G Corporation are predicted to be excluded.</li>
<li>The correlation between the price movement and the flow direction on the rebalancing trading day of constituent changes from the past reviews was quite high.</li>
<li>We can set the price impact expectation for the upcoming review even more aggressively, given that the size of the flow x DTV is more significant than in previous cases.</li>
</ul>


Samsung SDI and LG Chem are expected to be newly included in the index, while Hana Financial and KT&amp;G Corporation are predicted to be excluded.
The correlation between the price movement and the flow direction on the rebalancing trading day of constituent changes from the past reviews was quite high.
We can set the price impact expectation for the upcoming review even more aggressively, given that the size of the flow x DTV is more significant than in previous cases.


Price/Flow Impact on Four Constituent Changes in KODEX Top 5 Plus ETF Rebalancing in June

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<ul>
<li>On 29 March, SK Inc announced that it will cancel 0.95 million in treasury shares, which represents 1.3% of the company's outstanding shares and 5% of treasury shares.</li>
<li>One of the concerns about SK Inc in the past several weeks has been lower DPS of 5,000 won in 2022 versus DPS of 8,000 won in 2021.</li>
<li>Our base case valuation of SK Inc is NAV of 19.7 trillion won (NAV per share of 266,113 won), representing a 54% upside from current levels. </li>
</ul>


On 29 March, SK Inc announced that it will cancel 0.95 million in treasury shares, which represents 1.3% of the company's outstanding shares and 5% of treasury shares.
One of the concerns about SK Inc in the past several weeks has been lower DPS of 5,000 won in 2022 versus DPS of 8,000 won in 2021.
Our base case valuation of SK Inc is NAV of 19.7 trillion won (NAV per share of 266,113 won), representing a 54% upside from current levels. 


SK Inc: Shares Cancellation & Updated NAV Valuation

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

<ul>
<li>The 200 largest weighted companies in the GEM index reported average EPS growth of +14.2%y/y for 4Q22-to-date, slightly down from the +15.7% reported for 3Q22.</li>
<li>Only 54% of companies delivered positive sales surprises, and only 49% delivered positive EPS surprises, significantly down from the trend seen over the past 2 years.</li>
<li>Historically, there has been a significant difference in relative share price performance between the largest positive versus negative surprise generators, for 3 months after the reporting date.</li>
</ul>


The 200 largest weighted companies in the GEM index reported average EPS growth of +14.2%y/y for 4Q22-to-date, slightly down from the +15.7% reported for 3Q22.
Only 54% of companies delivered positive sales surprises, and only 49% delivered positive EPS surprises, significantly down from the trend seen over the past 2 years.
Historically, there has been a significant difference in relative share price performance between the largest positive versus negative surprise generators, for 3 months after the reporting date.


Global Emerging Markets: Reporting Season Summary, 4Q2022

<ul>
<li>SK Innovation will buy back its shares, worth about 10% of the total issued shares, through a tender offer and offer SK On stocks as consideration instead of cash.</li>
<li>Even if there is allocation risk, as only 10% of SO are targeted, expectations that pricing discrepancy can sufficiently offset this should be the factor driving up the price today.</li>
<li>Additional trading openings? This depends on the disparity widening between the intrinsic value of SK On and the exchange ratio.</li>
</ul>


SK Innovation will buy back its shares, worth about 10% of the total issued shares, through a tender offer and offer SK On stocks as consideration instead of cash.
Even if there is allocation risk, as only 10% of SO are targeted, expectations that pricing discrepancy can sufficiently offset this should be the factor driving up the price today.
Additional trading openings? This depends on the disparity widening between the intrinsic value of SK On and the exchange ratio.


Detailing & Assessing SK Innovation's Exchange Offer with SK On Shares as Consideration (10% of SO)

Mirae Asset TIGER Secondary Cell ETF / Event-Driven

<ul>
<li>There seems to be no constituent change this time. However, opportunities from cap reversion are likely to lead to noteworthy passive flows.</li>
<li>Ecopro BM and Ecopro Co will experience a weight movement of -4.35% and -3.68%p. On the other hand, SK Innovation will enjoy the most pleasant passive impact.</li>
<li>At KODEX Battery's March rebalancing, the Long SK Innovation Short Ecopro BM position setup provided a return of more than 10% with a similar level of impact x ADTV.</li>
</ul>


There seems to be no constituent change this time. However, opportunities from cap reversion are likely to lead to noteworthy passive flows.
Ecopro BM and Ecopro Co will experience a weight movement of -4.35% and -3.68%p. On the other hand, SK Innovation will enjoy the most pleasant passive impact.
At KODEX Battery's March rebalancing, the Long SK Innovation Short Ecopro BM position setup provided a return of more than 10% with a similar level of impact x ADTV.


Flow Trading Targeting Cap Reversion in TIGER Battery ETF Rebalancing on April 13

South Korea

SK Innovation Co., Ltd. refines, markets, and distributes oil.  The Company produces a variety of petroleum products, such as gasoline, kerosene, liquefied petroleumgas (LPG), and diesel oil.  SK Energy also manufactures petrochemical p roducts, including paraxylene, synthetic resins, styrene monomer, and ethylene.

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SK Innovation (096770 KS)

Price/Flow Impact on Four Constituent Changes in KODEX Top 5 Plus ETF Rebalancing in June

This post presents a Long Short basket trade idea on the four potential constituent changes in the KODEX Top 5 Plus TR ETF rebalancing in June.

Sanghyun Park

SK Inc: Shares Cancellation & Updated NAV Valuation

On 29 March, SK Inc announced that it will cancel 0.95 million in treasury shares, which represents 1.3% of the company's outstanding shares and 5%...

Douglas Kim

Global Emerging Markets: Reporting Season Summary, 4Q2022

In this quarterly insight, we analyse recent GEM reporting trends with reference to Sales and EPS growth, size and percentage of positive...

Wium Malan, CFA

Detailing & Assessing SK Innovation's Exchange Offer with SK On Shares as Consideration (10% of SO)

This post details and assesses SK Innovation's exchange offer with SK On shares as consideration, which was disclosed this morning.

Sanghyun Park

Flow Trading Targeting Cap Reversion in TIGER Battery ETF Rebalancing on April 13

This post investigates potential flow trading opportunities targeting those subject to a 10% cap reversion in TIGER Battery ETF's upcoming...

Sanghyun Park

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