Daily Brief South Korea: Kakao Pay, Meritz Financial Group, SK Telecom and more

In today’s briefing:

Shorting Kakao Pay on K200 Sector Index Passive Outflow Due to GICS Change on June 8
Meritz Financial Group: A Large Share Buyback Amid Global Financials Uncertainties
Korean Government Reviews Rules to Ease Foreign Ownership Limits

Shorting Kakao Pay on K200 Sector Index Passive Outflow Due to GICS Change on June 8

Kakao Pay’s GICS sector movement from IT to FINANCIALS creates flow trading opportunities due to the subsequent transfer between KOSPI 200’s sector sub-indices.
An outflow of ₩24.6B or 410K shares will occur. This is 0.6x ADTV. Given that the recent trading volume has further decreased, the actual impact will likely exceed 1.0x DTV.
It will be a concentrated flow in a single trading day by a single ETF, which gives us plenty of reasons for preemptively designing a short position targeting this.

On 17 March (after market close), Meritz Financial Group (138040 KS) announced a share buyback program worth 400 billion won, which represents 5.4% of its market cap.
Given the relative large size of this deal, it should have a positive impact on its share price, especially on a relative basis against its competitors.
The collapse of SVB Financial and uncertain investors’ reactions on the purchase of Credit Suisse by UBS will likely add to the global investors’ negative sentiment on the financial sector.

In recent days, the Korean government announced that it is reviewing foreign ownership limit rules.
The main reasons are to align South Korea’s financial policies in line with the global standards and improve the chances of South Korea becoming included in MSCI Developed country status.
Key companies that could benefit from potential raise of foreign ownership limit include SK Telecom, KT Corp, and SBS.

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