Daily Brief South Korea: Eoflow , SK Square , Youngpoong Paper Mfg and more

In today’s briefing:

Merger Arb Mondays (11 Sep) – Eoflow, Mason, Liontown, Newcrest, United Malt, OreCorp, MPI
KRX Sector Index Series Rebalancing: Heavy Shorting on SK Square Is Anticipated
KOSPI Size Indices – Changes in September & Implications

Merger Arb Mondays (11 Sep) – Eoflow, Mason, Liontown, Newcrest, United Malt, OreCorp, MPI

The most noteworthy developments include Samsung Electronics being newly added to the Semicon sector, while SK Square has been removed.
We must be mindful of the potential concentration of shorting flow on SK Square as most names expected to experience negative flows do not fall under the KS200/KQ150 membership.
Our strategic approach can take three directions: 1. aim at only those receiving positive flows, 2. heavy shorting SK Square, and 3. long-short the four with the most flow size.

There are 8 migrations from MidCap to LargeCap, 7 LargeCap to MidCap, 8 new additions to MidCap, 17 SmallCap to MidCap, 23 MidCap to SmallCap, 5 new additions to SmallCap.
The migrations from SmallCap to MidCap have outperformed the stocks migrating between other segments by a huge margin over the last few months.
Given the huge outperformance and looking at how the migrations have performed historically, we’d expect the stocks migrating to MidCap to underperform post implementation of the changes.

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