Category

South Korea

Apr 22
0

Daily Brief South Korea: Dongwon Industries, Ts Corporation and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Aggressive Shorting on Dongwon Industries, Which Has Not Been Noticed as a K200 Deletion
  • Korea Small Cap Gem #21: TS Corp – Addicted to Sugar

Aggressive Shorting on Dongwon Industries, Which Has Not Been Noticed as a K200 Deletion

By Sanghyun Park

  • Dongwon Industries’ float rate is less than 10% (1 – 63.15% – 27.65% = 9.20%), which makes it ineligible for KOSPI 200. KRX will reflect this in the June review.
  • The passive outflow size due to K200 deletion is expected to be about 50 billion won, which will cause an impact of about 28x ADTV.
  • Considering this deletion has not been sufficiently exposed in the market, the actual price impact may be even more significant and preemptive.

Korea Small Cap Gem #21: TS Corp – Addicted to Sugar

By Douglas Kim

  • Ts Corporation (001790 KS) is the 21st company in our Korea Small Cap Gems series.
  • TS Corp is one of the largest sugar refining companies in Korea. Rising raw sugar prices generally have a positive impact on TS Corp’s sales and profits. 
  • TS Corp owns very valuable real estate assets that are much larger than its current market cap (299 billion won).

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Apr 21
0

Daily Brief South Korea: LG Chem Ltd, Oci Co Ltd, Shift Up Corp, VA Corporation and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Flow Trading Opportunities on LG Chem with Potential Inclusion in Battery ETFs
  • Update on the Trading Opportunities Post OCI Spin-Off
  • 2022 Financial Results of Major Unlisted Companies in Korea
  • VA Corporation: One-Stop Metaverse Platform

Flow Trading Opportunities on LG Chem with Potential Inclusion in Battery ETFs

By Sanghyun Park

  • We now have an environment that allows Korea’s battery ETFs to include LG Chem in upcoming reviews. KODEX is in June, and TIGER is in July.
  • If LG Chem is included in each review, the expected one-day inflow is at 0.7-0.8x DTV, which can lead to a price impact similar to that of SKIET in 2021.
  • We should consider setups targeting this, including Long Short, which utilizes LG Energy Solution or LG Corp as a hedge.

Update on the Trading Opportunities Post OCI Spin-Off

By Douglas Kim

  • The Korea Exchange announced today (20 April) the change in index constituents and major dates for the Oci Co Ltd (010060 KS) spin-off. 
  • Oci Co Ltd (010060 KS)’s shares will be suspended from trading from 27 April to 26 May 2023.
  • After the spin-off and relisting of holdco/opco shares, we believe that there is a greater probability of OCI Co (opco) shares outperforming OCI Holdings (holdco). 

2022 Financial Results of Major Unlisted Companies in Korea

By Douglas Kim

  • In this insight, we provide 2022 key income statement items of 12 major unlisted companies in Korea that are likely to complete their IPOs in the next 6-12 months. 
  • Among these 12 private companies, the top five with the highest sales growth in 2022 include Shift Up, Foosung Global, Ecopro Materials, Nexteel, and Smilegate RPG.
  • The top five companies with the highest operating profit growth in 2022 include Nexteel, Ecopro Materials, CJ Olive Young, Foosung Global, and Smilegate RPG. 

VA Corporation: One-Stop Metaverse Platform

By Shifara Samsudeen, ACMA, CGMA

  • Founded in 2021 and headquartered in Seoul, VA Corporation (VA KS) has developed a virtual media platform for the metaverse industry.
  • Through the use of VR, the company’s metaverse platform provides services from planning and production to branding and distribution of content.
  • The company achieved the unicorn status within 13-months of its founding due to its proven track record, making it an attractive investment in the metaverse space.

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Apr 20
0

Daily Brief South Korea: Bh Co Ltd, Hanwha Aerospace and more

By | Daily Briefs, South Korea

In today’s briefing:

  • An Exposed Target for Flow Trading on KQ150 Ad-Hoc Change by BH’s KOSPI Transfer Listing
  • Launch of Starlink Service by SpaceX – Impact on 11 Korean Companies

An Exposed Target for Flow Trading on KQ150 Ad-Hoc Change by BH’s KOSPI Transfer Listing

By Sanghyun Park

  • BH Co Ltd (090460 KS) will likely complete the transfer listing by early May, suggesting an ad-hoc change may occur before the regular rebalancing of the KOSDAQ 150 in June.
  • BH’s GICS sector is INFORMATION TECHNOLOGY. It means the top reserved issue at the previous review gets to replace BH. At this point, it will be HFR Inc (230240 KS).
  • We should build up a Long position on HFR right after KRX approves BH’s transfer and then close it on the next trading day after the KQ150 corporate action announcement.

Launch of Starlink Service by SpaceX – Impact on 11 Korean Companies

By Douglas Kim

  • The Starlink service is expected to be launched in Korea in 2Q/3Q 2023. Starlink gained more than 1 million active subscribers globally as of December 2022.
  • The launch of the Starlink service in Korea is likely to have a positive impact on  companies such as Hanwha Aerospace, Solu-M, Intellian Technologies, and Satrec Initiative.
  • We like a pair trade involving long (basket of 8 stocks above that are positively impacted by Starlink launch in Korea) and short (three major Korean telcos).

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Apr 19
0

Daily Brief South Korea: KT Corp Sp Adr, Ecopro Co Ltd and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Targeting the Widening of KT Corp ADR Premium Amid MSCI Inclusion
  • Korean Holdcos Vs Opcos Gap Trading Opportunities in 2Q 2023

Targeting the Widening of KT Corp ADR Premium Amid MSCI Inclusion

By Sanghyun Park

  • We should expect significant changes in KT’s ADR premium approaching the implementation date as foreign institutions leading the passive flow for MSCI Korea constituents have typically preferred ADRs.
  • Looking at the previous two occasions, the ADR disparity widened from the midpoint of the review period. And this trend continued for a while after the implementation.
  • Although KT’s ADR disparity has not yet significantly expanded, we may witness a similar pattern this time as well, given that it has been continuously moving in the premium recently.

Korean Holdcos Vs Opcos Gap Trading Opportunities in 2Q 2023

By Douglas Kim

  • In this insight, we highlight the pricing gap divergences of the major Korean holdcos and opcos in 2Q 2023.
  • Of the 38 pair trades, 21 of them involved holdcos outperforming opcos YTD and 17 of them involved opcos outperforming holdcos in the same period.
  • We highlight 38 pair trades that involve Korean holdcos and opcos.

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Apr 18
0

Daily Brief South Korea: Ecopro Co Ltd and more

By | Daily Briefs, South Korea

In today’s briefing:

  • MSCI May 2023 QCIR: Potential Changes & Things to Watch as Review Period Commences

MSCI May 2023 QCIR: Potential Changes & Things to Watch as Review Period Commences

By Brian Freitas

  • The review period for the price cutoff for the MSCI May Quarterly Comprehensive Index Review (QCIR) starts today. MSCI should choose a day from this week to compute market cap.
  • The most changes (especially adds) are expected in mainland China following an expansion of the universe for inclusion of stocks in Northbound Stock Connect.
  • There are stocks in India where there will be FIF changes triggering large flows and there are things to watch on some stocks in Korea and China.

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Apr 17
0

Daily Brief South Korea: Lotte Shopping Co and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Aiming for Price Movement Patterns with Low Market Exposure in MSCI Korea May Review

Aiming for Price Movement Patterns with Low Market Exposure in MSCI Korea May Review

By Sanghyun Park

  • We should aim for price movement patterns with relatively low market exposure. One of them is the post-effective upward price movement of deletions.
  • The relative price performance for one week after the implementation compared to KOSPI 200 was consistently positive, ranging from 2.41% to 6.82%.
  • Given the recent price movement of four deletion candidates, there is again a high possibility that the price distortion caused by MSCI flow will revert after the effective date.

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Apr 16
0

Daily Brief South Korea: Samsung SDI and more

By | Daily Briefs, South Korea

In today’s briefing:

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

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

By Sanghyun Park

  • Samsung SDI and LG Chem are expected to be newly included in the index, while Hana Financial and KT&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.

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Apr 15
0

Daily Brief South Korea: WCP, Ecopro BM Co Ltd and more

By | Daily Briefs, South Korea

In today’s briefing:

  • A High Conviction Long Short Trade in KODEX Battery ETF Rebalancing in June
  • Ecopro BM: Considering on a CB Issuance of 500 Billion Won

A High Conviction Long Short Trade in KODEX Battery ETF Rebalancing in June

By Sanghyun Park

  • WCP will likely be included in the rebalancing of Samsung KODEX Secondary Battery Industry ETF in June. And we should consider the possibility of this happening to be quite high.
  • We can expect a daily passive inflow of around 0.3x compared to WCP’s typical DTV. The practical correlation with the price should be higher than the theoretical level.
  • We should consider using SKIET, which engages in the same business in the same sector, as a hedge. WCP/SKIET Long Short achieved considerable performance within the past week’s window.

Ecopro BM: Considering on a CB Issuance of 500 Billion Won

By Douglas Kim

  • According to Hankyung Business Daily, Ecopro BM Co Ltd (247540 KS) is considering on issuing a CB worth 500 billion won to various private equity and asset managment companies.
  • We would be negative on the potential CB issuance of nearly 500 billion won by Ecopro BM.
  • The potential issuance of this CB is a signal from the management that it is trying to capitalize on the recent sharp increases in share price to raise more capital.

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Apr 14
0

Daily Brief South Korea: Sun Kwang and more

By | Daily Briefs, South Korea

In today’s briefing:

  • KOSDAQ150 Ad Hoc Index Rebalance: Sun Kwang (003100) To Replace SK Oceanplant (100090)

KOSDAQ150 Ad Hoc Index Rebalance: Sun Kwang (003100) To Replace SK Oceanplant (100090)

By Brian Freitas

  • Following SK Oceanplant (100090 KS) moving from the KOSDAQ to KOSPI Market, the stock will be deleted from the KOSDAQ 150 Index and replaced with Sun Kwang (003100 KS).
  • The change will be implemented at the close on 18 April and passive trackers will need to trade over 1x ADV on both stocks.
  • Sun Kwang (003100 KS) was a high probability index inclusion in June, so this brings forward the inclusion by a couple of months.

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Apr 13
0

Daily Brief South Korea: Mirae Asset Tiger 200 It ETF, Enchem, Boryung Pharmaceutical and more

By | Daily Briefs, South Korea

In today’s briefing:

  • An Alternative Flow Trading Angle for K200 Rebalancing in June
  • Enchem: Block Deal Sale of 14% of Outstanding Shares
  • Boryung Pharmaceutical (003850 KS): Strong 4Q22 Result; New Drugs to Drive Long-Term Growth

An Alternative Flow Trading Angle for K200 Rebalancing in June

By Sanghyun Park

  • In KOSPI 200 IT Sector Index rebalancing in June, we should consider using Samsung SDS as a hedge for short positions on KakaoPay from a day trading perspective.
  • The expected performance of traditional flow trading based on passive impact has become uncertain due to flexible rebalancing trading by local pensions and short selling resumption on K200 new entrants.
  • As such, flow events on these sector indices that are still pretty much under the radar in the market could be a meaningful alternative for us.

Enchem: Block Deal Sale of 14% of Outstanding Shares

By Douglas Kim

  • Chosun Business Daily reported today that Enchem is considering on conducting a block deal sale of nearly 14% of its outstanding shares, representing about 160 billion won.
  • Brahman PS Investment is the likely seller in this block deal sale. If the block deal sale is successful, Brahman will have gained more than 6x on its original investment.
  • We would not be buyers of the block deal sale mainly due to unattractive valuations, volatile profitability, and not enough block deal sale discount. 

Boryung Pharmaceutical (003850 KS): Strong 4Q22 Result; New Drugs to Drive Long-Term Growth

By Tina Banerjee

  • Boryung Pharmaceutical (003850 KS) reported stellar Q4 results, with revenue increasing 21% YoY, driven prescription drugs. 2022 revenue and operating profit surged 20%+ YoY and surpassed guidance.
  • Boryung has guided for 2023 revenue and operating profit of KRW810 billion and KRW61 billion, representing growth of 12% and 1%, YoY, respectively.
  • Driven by in-licensed drugs and pipeline progress, Boryung’s target of KRW1 trillion revenue and KRW200 billion operating profit by 2026, seems achievable.

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