In today’s briefing:
- FnGuide Top10 Equal Weight Index Rebalance Preview: Kia Corp Could Replace Posco Future M
- Investigating Arbitrage Trading Potential to Exploit ETF Tracking Error Widening in Korea
FnGuide Top10 Equal Weight Index Rebalance Preview: Kia Corp Could Replace Posco Future M
- The Samsung KODEX Fn Top10 Equal Weight ETF (395170 KS) tracks the FnGuide Top 10 Index and has an AUM of US$264m.
- We expect Kia Corp (000270 KS) to replace Posco Future M (003670 KS) in the index at the December rebalance.
- There will be 0.4x ADV to buy in Kia Corp (000270 KS) while passives will need to sell 0.1x ADV of Posco Future M (003670 KS).
Investigating Arbitrage Trading Potential to Exploit ETF Tracking Error Widening in Korea
- Korea’s financial authorities prompted LPs to refrain from providing liquidity to ETFs through short-selling. This has resulted in a significant increase in both the frequency and magnitude of tracking errors.
- Therefore, it’s time to actively explore this from an arbitrage trading standpoint. ETF arbitrage involves straightforward steps: purchasing and redeeming ETFs, followed by selling the underlying shares in the market.
- The focus should be particularly directed towards sector ETFs that include a select few large-cap stocks carrying single-stock futures.
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