In today’s briefing:
- KRX Imposes a 20% Cap on Weight Ceiling in Sector ETFs with Few Constituents
- Gap Trades in Korean Prefs Vs Common Share Pairs in 2Q 2024
- Korean Holdcos Vs Opcos Gap Trading Opportunities in 2Q 2024
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KRX Imposes a 20% Cap on Weight Ceiling in Sector ETFs with Few Constituents
- KRX limits individual stock weight to 20% in ETFs with few constituents. KRX confirms working on it, with an official announcement expected soon.
- Excludes index ETFs like KOSPI 200. KRX hasn’t finalized criteria for constituent number but expected to involve fewer than 30 stocks.
- This could open new passive trading opportunities. Sector ETF cap at 30%, large AUM ones offer noteworthy trading potential.
Gap Trades in Korean Prefs Vs Common Share Pairs in 2Q 2024
- In this insight, we discuss numerous gap trades involving Korean preferred and common shares in 2Q 2024.
- Although the discount on the preferred shares versus the common shares has been gradually narrowing in the past decade, this discount increased from end of 2021 to 1 April 2024.
- On a longer timeframe (3-4 years), we believe this discount could narrow further to the 20-25% range, which provides additional opportunities for the Korean preferred shares to further make gains.
Korean Holdcos Vs Opcos Gap Trading Opportunities in 2Q 2024
- In this insight, we highlight the recent pricing gap divergences of the major Korean holdcos and opcos which could provide trading opportunities in 2Q 2024.
- Of the 38 pair trades, 26 of them involved holdcos outperforming opcos in the past six months, suggesting increased capital allocation to Korean holdcos relative to their opcos.
- These pairs could generate trading opportunities in terms of their pricing gaps closing reversal. [CJ Corp vs CJ Cheiljedang & Hanjin KAL Corp vs Korean Air Lines].