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>Compared to the tightly crowded KOSPI 200, the sector ETFs' rebalancing flow trading appears relatively less crowded, which led to a significantly higher flow/price correlation on the rebalancing day.</li>
<li>The KRX now delivers the rebalancing results of the KRX Sector &amp; K-New Deal Indexes only to paying customers. This can increase the profit effect of acquiring prior information.</li>
<li>So, safe play, which builds up a position from the time this information is acquired, rather than an aggressive preemptive position build-up, can still obtain a sufficient level of juice.</li>
</ul>


Compared to the tightly crowded KOSPI 200, the sector ETFs' rebalancing flow trading appears relatively less crowded, which led to a significantly higher flow/price correlation on the rebalancing day.
The KRX now delivers the rebalancing results of the KRX Sector &amp; K-New Deal Indexes only to paying customers. This can increase the profit effect of acquiring prior information.
So, safe play, which builds up a position from the time this information is acquired, rather than an aggressive preemptive position build-up, can still obtain a sufficient level of juice.


Backtesting Implications: Korea Sector ETFs Rebalancing on the 8th

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<ul>
<li>After the disappointing withdrawal of two IPOs (SK Shieldus and One Store) in 2Q 2022, shares of SK Square are starting to recover in the past seven weeks. </li>
<li>On a NAV basis, shares of SK Square are deeply undervalued. The current valuation reflects a NAV holdco discount of nearly 72.5%.</li>
<li>If we assume a moderate 50% holdco discount, this would suggest a NAV of 74,677 won per share, which would be 81% higher than current price.</li>
</ul>


After the disappointing withdrawal of two IPOs (SK Shieldus and One Store) in 2Q 2022, shares of SK Square are starting to recover in the past seven weeks. 
On a NAV basis, shares of SK Square are deeply undervalued. The current valuation reflects a NAV holdco discount of nearly 72.5%.
If we assume a moderate 50% holdco discount, this would suggest a NAV of 74,677 won per share, which would be 81% higher than current price.


SK Square: The Excessive NAV Valuation Gap Is Likely to Narrow

<ul>
<li>On 22 August, it was announced that KB Kookmin Bank invested 200 billion won worth of TMap Mobility, valuing the company at 2.2 trillion won ($1.7 billion).</li>
<li>At the end of 2021, SK Square owned a 66.3% stake in TMap Mobility. After this investment, KB Kookmin Bank will own an 8.2% stake in TMap Mobility.</li>
<li>TMap Mobility generated sales of 74.5 billion won,  operating loss of 67.8 billion won, and net loss of 5.3 billion won in 2021.</li>
</ul>


On 22 August, it was announced that KB Kookmin Bank invested 200 billion won worth of TMap Mobility, valuing the company at 2.2 trillion won ($1.7 billion).
At the end of 2021, SK Square owned a 66.3% stake in TMap Mobility. After this investment, KB Kookmin Bank will own an 8.2% stake in TMap Mobility.
TMap Mobility generated sales of 74.5 billion won,  operating loss of 67.8 billion won, and net loss of 5.3 billion won in 2021.


KB Kookmin Bank Invests 200 Billion Won in SK Square's TMap Mobility

<ul>
<li>The correlation and sensitivity between passive flow and price impact have been significantly high for adds/deletes. So, we need a basket-trade setup focusing on potential adds/deletes.</li>
<li>We will see 12 changes for Semicon and 6 for Autos. Bank won't present any change.</li>
<li>
<strong>SK Square</strong> and <strong>Iljin Hysolus</strong> are the most prominent names to join the KRX Sector Indices this time. They will have a passive impact of 2.03x and 3.97x ADTVs, respectively.</li>
</ul>


The correlation and sensitivity between passive flow and price impact have been significantly high for adds/deletes. So, we need a basket-trade setup focusing on potential adds/deletes.
We will see 12 changes for Semicon and 6 for Autos. Bank won't present any change.

SK Square and Iljin Hysolus are the most prominent names to join the KRX Sector Indices this time. They will have a passive impact of 2.03x and 3.97x ADTVs, respectively.


Introducing KRX Sector Indices: SK Square & Iljin Hysolus Deserve Attention for Rebalancing

<ul>
<li>The question now is whether this event can lead to a structural uptrend in LG Corp. I am skeptical about this.</li>
<li>LG Corp took a preemptive action to increase its attractiveness as a dividend stock to prevent a share price decline ahead of the listing of LG CNS.</li>
<li>However, this measure does not address the root cause of LG Corp's massive NAV discount. So, I would consider a short position setup for LG Corp.</li>
</ul>


The question now is whether this event can lead to a structural uptrend in LG Corp. I am skeptical about this.
LG Corp took a preemptive action to increase its attractiveness as a dividend stock to prevent a share price decline ahead of the listing of LG CNS.
However, this measure does not address the root cause of LG Corp's massive NAV discount. So, I would consider a short position setup for LG Corp.


Short LG Corp on the Unsustainable Price Spike

South Korea

SK Square Co., Ltd. operates as an investment company. The Company invests in semiconductors, information and communications technologies, and other industries. SK Square conducts businesses in South Korea.

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SK Square (402340 KS)

Backtesting Implications: Korea Sector ETFs Rebalancing on the 8th

This post backtests the flow trading performance for the rebalancings of Korea's sector ETFs on the 8th and discusses unique patterns and...

Sanghyun Park

SK Square: The Excessive NAV Valuation Gap Is Likely to Narrow

On a NAV basis, shares of SK Square are deeply undervalued. If we assume a moderate 50% holdco discount, this would suggest a NAV of 74,677 won per...

Douglas Kim

KB Kookmin Bank Invests 200 Billion Won in SK Square's TMap Mobility

On 22 August, it was announced that KB Kookmin Bank invested 200 billion won worth of TMap Mobility, valuing the company at 2.2 trillion won ($1.7...

Douglas Kim

Introducing KRX Sector Indices: SK Square & Iljin Hysolus Deserve Attention for Rebalancing

This post introduces the KRX Sector Indices and screens the likely adds/deletes at the upcoming rebalancing in September, including SK Square and...

Sanghyun Park

Short LG Corp on the Unsustainable Price Spike

This post discusses why LG Corp's 10% price surge on Monday, driven by the improved shareholder return policies, should be a good entry point for a...

Sanghyun Park

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