Category

South Korea

Dec 04
0

Daily Brief South Korea: KT Corp, Celltrion Inc and more

By | Daily Briefs, South Korea

In today’s briefing:

  • KOSPI 200 Up/Down Weights: Official Results & Passive Impacts on T-1 Effective
  • TIGER Top 10 Rebalancing: Four Names to Trade on T-1 Effective

KOSPI 200 Up/Down Weights: Official Results & Passive Impacts on T-1 Effective

By Sanghyun Park

TIGER Top 10 Rebalancing: Four Names to Trade on T-1 Effective

By Sanghyun Park

  • Kakao managed to stay out of the relegation zone. Instead, Kia was pushed to the borderline. But POSCO failed to up its float rate, so Kia stayed in.
  • Besides that, LG Energy Solution and Celltrion made it to the index, replacing KB Financial and Shinhan Financial.
  • These passive flows appears to be of sufficient magnitude to cause a substantial price impact on T-1 Effectiveness. But it should also be approached with a fairly short window.

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Dec 03
0

Daily Brief South Korea: Samsung Electronics and more

By | Daily Briefs, South Korea

In today’s briefing:

  • When Will Samsung Life Insurance Be Forced to Sell Its Stake in Samsung Electronics by the Govt?

When Will Samsung Life Insurance Be Forced to Sell Its Stake in Samsung Electronics by the Govt?

By Douglas Kim

  • The debate about whether or not Samsung Life Insurance should sell its stake in Samsung Electronics is being reviewed by the National Assembly once again.
  • The greater probability event is status quo. The Korean government is not likely to force Samsung Life Insurance to sell its stake in Samsung Electronics in the near term.
  • Korean government is likely to require Samsung Life Insurance to sell its stake in Samsung Electronics after the Lee family has paid off all their inheritance taxes in 3-4 years.

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Dec 01
0

Daily Brief South Korea: HYBE, Posco Chemical Co Ltd, BGF Co Ltd, Hana Financial and more

By | Daily Briefs, South Korea

In today’s briefing:

  • End of Mandatory Lock-Up Periods for 58 Companies in Korea in December 2022
  • CSI KRX China-Korea: Rebalancing Results from KRX & Flow Trading Considerations
  • BGF & BGF Retail Pair Trade: Two Sons of BGF Chairman Hong Receive a Combined 20.9% Stake in BGF
  • South Korean Banks Screener; Hana Financial in the Positive Spotlight

End of Mandatory Lock-Up Periods for 58 Companies in Korea in December 2022

By Douglas Kim

  • We discuss end of the mandatory lock-up periods for 58 stocks in Korea in December 2022, among which 9 are in KOSPI and 49 are in KOSDAQ.
  • These 58 stocks on average could be subject to further selling pressures in December and could underperform relative to the market. 
  • Among these 58 stocks, the top 5 market cap stocks include HYBE, Kakao Games, WCP, Sillajen, and Duksan Neolux. 

CSI KRX China-Korea: Rebalancing Results from KRX & Flow Trading Considerations

By Sanghyun Park

  • KRX unveiled the rebalancing results of the CSI KRX China-Korea indices for Korean constituents yesterday.
  • There is still insufficient evidence data to estimate specific passive impact. The previous rebalancing in June showed no clear correlation between constituent changes and price impact.
  • Although it may be risky to trade on this rebalancing, monitoring the correlation of their passive impact at this point, one year after the release, seems worthwhile.

BGF & BGF Retail Pair Trade: Two Sons of BGF Chairman Hong Receive a Combined 20.9% Stake in BGF

By Douglas Kim

  • It was announced today that Hong Jung-Guk (eldest son) received a 10.5% stake in BGF Co. (10 million shares) from his father Hong Suk-Jo. 
  • Hong Jung-Hyeok’s (second son) stake in BGF also increased from 0.03% to 10.5%.
  • We like a pair trade between BGF Co (go long) and BGF Retail (go short). The combination of price momentum and valuation favor BGF vs BGF Retail. 

South Korean Banks Screener; Hana Financial in the Positive Spotlight

By Victor Galliano

  • Six of the seven South Korean banks screen favourably on valuation versus returns metrics to September 2022; we add Hana Financial, to our buy rating on KB Financial
  • Hana has undemanding valuations, and improving pre-provision and post-provision returns,  it also has sound core capital ratio of close to 13%
  • We remain neutral on digital bank KakaoBank where we are deterred by high cost of risk metrics relative to its peers; we continue to seek positive catalysts on this name

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Nov 30
0

Daily Brief South Korea: Doosan Bobcat Inc, Iljin Holdings and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Doosan Bobcat Placement – Momentum Is Strong but past Deals Have Been a Mixed Bag
  • StubWorld: Iljin Holdings – Discounts On Discounts

Doosan Bobcat Placement – Momentum Is Strong but past Deals Have Been a Mixed Bag

By Ethan Aw

  • Doosan Bobcat Inc (241560 KS) aims to sell a US$145m block. Its recent price momentum is strong but past deals have shown mixed results. 
  • The deal doesn’t appear to be well flagged and is a relatively large one to digest, representing 20.9 days of its three month ADV.  
  • In this note, we will run the deal through our ECM framework and comment on other deal dynamics.

StubWorld: Iljin Holdings – Discounts On Discounts

By David Blennerhassett

  • Iljin Holdings (015860 KS)‘s implied stub is around levels just prior to the onset of Covid, despite strong subsequent deconsolidated earnings. 50.1%-held Iljin Diamond (081000 KS) is itself heavily discounted. 
  • Preceding my comments on Iljin are the current setup/unwind tables for Asia-Pacific Holdcos. 
  • These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

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Nov 28
0

Daily Brief South Korea: HMM Co., Ltd. and more

By | Daily Briefs, South Korea

In today’s briefing:

  • KOSPI 200 Sector/Size & KRX 300 Sector: Constituent Changes & Trading Points

KOSPI 200 Sector/Size & KRX 300 Sector: Constituent Changes & Trading Points

By Sanghyun Park

  • The additional Lotte Confectionery/Samyang Holdings flow will come from K200/KRX 300 Consumer Staples, K200 MidSmallCap, and K200 Ex-Top. However, the actual flow impact wouldn’t be significant.
  • From a flow trading standpoint, the KOSPI 50’s HMM/Hanon System probably deserves our attention because additional inflows come from the pensions that account for more than half of local PASSIVE.
  • Since their rebalancing trading tends to be somewhat dispersed, the return rate was the best when the position holding period was from T-3 to the effective date.

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Nov 26
0

Daily Brief South Korea: Oci Co Ltd and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Trading Considerations on the OCI Demerger
  • OCI Spin-Off: Trade Opportunities Post Relisting, Valuations, & Impact on KOSPI 200

Trading Considerations on the OCI Demerger

By Sanghyun Park

  • Value accretion by unlocking the voting eligibility of treasury shares won’t happen as the company holds no treasury share.
  • But KOSPI 200 passive flows will pose a noteworthy trading point. PASSIVE’s selling outflow will be about 700-800K shares, 1.6x ADTV.
  • Market cap imbalance, primarily driven by the tender offer dynamic and the split ratio that is excessively focused on Holdco, will likely exacerbate Holdco → Opco migration after re-listing.

OCI Spin-Off: Trade Opportunities Post Relisting, Valuations, & Impact on KOSPI 200

By Douglas Kim

  • 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).
  • However, the degree of outperformance of OCI Co vs OCI Holdings is not likely to be similar to other recent spin-offs such as F&F Co and F&F Holdings.
  • We have a long-term bullish view of OCI over the next one to two years. It is trading at P/E of 3.1x and P/B of 0.6x based 2022 earnings estimates.

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Nov 25
0

Daily Brief South Korea: Korea Zinc and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Korea Zinc: Treasury Shares Swap with LG Chem & Hanwha Corp + Treasury Share Sale

Korea Zinc: Treasury Shares Swap with LG Chem & Hanwha Corp + Treasury Share Sale

By Douglas Kim

  • On 23 November, Korea Zinc announced that it will swap its treasury shares with LG Chem and Hanwha Corp and sell part of its treasury shares to other investors.
  • Korea Zinc could gain additional dividend payments by exchanging part of its treasury shares with shares of LG Chem and Hanwha Corp. 
  • Potential separation of Young Poong and Korea Zinc between the Choi and Jang families is likely to be an on-going process, although it is difficult to tell the exact timing. 

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Nov 24
0

Daily Brief South Korea: HLB Inc, Jb Financial Group and more

By | Daily Briefs, South Korea

In today’s briefing:

  • A Guide to Arb Trade in Rights Offer: Feat. HLB & Lotte Chemical
  • JB Financial Group: Four Key Investment Merits

A Guide to Arb Trade in Rights Offer: Feat. HLB & Lotte Chemical

By Sanghyun Park

  • This post will specifically examine arb trade opportunities during the subscription rights trading period, with the recent HLB and Lotte Chemical cases.
  • HLB gave an arb yield of 8%. As for Lotte Chemical, the size (₩1.1T) is much bigger, and it carries single-stock futures, a powerful incentive for arb traders.
  • Another thing for Lotte Chemical is that it is unclear whether the major shareholders will participate in the subscription, which can lead to a widening of our arb spread.

JB Financial Group: Four Key Investment Merits

By Douglas Kim

  • There are four major reasons why we like JB Financial Group.
  • They include highest ROE among peers, highest dividend yield among peers, potential inclusion in KOSPI200 in 2023, and continued pressure by Align Partners to improve corporate governance.
  • One of the key risk factors of the company is that it is not a nationwide banking group but most of its operations are in the southwestern portion of Korea.

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Nov 23
0

Daily Brief South Korea: Jb Financial Group and more

By | Daily Briefs, South Korea

In today’s briefing:

  • KOSPI 200 Rebalance in 1H 2023 – Five Potential Additions Post Deletions of Meritz Affiliates

KOSPI 200 Rebalance in 1H 2023 – Five Potential Additions Post Deletions of Meritz Affiliates

By Douglas Kim

  • Meritz Financial Group’s decision to delist Meritz Fire & Marine Insurance and Meritz Securities in 1H 2023 will result in at least two new additions to KOSPI 200.
  • We highlight five companies which could be potential additions to KOSPI 200 in 1H 2023.
  • Five potential additions to KOSPI 200 in 1H 2023 include Jb Financial Group, Hyundai Construction Equipment, Dentium, Samyang Foods, and Lotte Rental. 

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Nov 22
0

Daily Brief South Korea: Meritz Financial Group and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Meritz Merger Event: Swap Conditions, Spread Arb Trade, & K200 Flow Implementation
  • Meritz Financial Group: Comprehensive Stock Swap + Delisting of Meritz Sec. And Meritz F&M Insurance

Meritz Merger Event: Swap Conditions, Spread Arb Trade, & K200 Flow Implementation

By Sanghyun Park

  • The last trading day to secure appraisal rights is today (the 22nd). You must buy stocks by today to make arb trade possible using appraisal rights.
  • We should consider LONG FINANCIAL SHORT FIRE/SECURITIES. KSD allows us to maintain borrowed stocks of the target company without redemption procedures if new stocks are listed after the merger.
  • K200 trackers will have to buy in for FIRE at the close on January 27, whereas SECURITIES will be on March 31. We should design a setup targeting this preemptively.

Meritz Financial Group: Comprehensive Stock Swap + Delisting of Meritz Sec. And Meritz F&M Insurance

By Douglas Kim

  • After the market close today, Meritz Financial Group (MFG) made one of the biggest announcements in the history of the group.
  • It announced that Meritz Fire & Marine Insurance and Meritz Securities will become fully owned subsidiaries of Meritz Financial Group. Meritz F&M Insurance and Meritz Securities will also be delisted.
  • MFG is making a real positive change through the share swaps among the three companies. This will likely have the biggest positive impact will be on MFG. 

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