Daily Brief South Korea: Posco ADR, Doosan Fuel Cell , EcoPro Materials and more

In today’s briefing:

Trading Opportunities Targeting Potential ADR Discount Increases from Korea’s Short-Selling Ban
Momentum Trading Opportunities Among Top 50 Stocks in KOSPI With Highest Short Interest Ratios
Trading Strategy of Ecopro Materials IPO Post Book Building Results and Short Selling Ban

Trading Opportunities Targeting Potential ADR Discount Increases from Korea’s Short-Selling Ban

Given Korea’s blanket ban on short-selling, we should concentrate on the likelihood of these ADRs being significantly discounted compared to their underlying shares.
It should persist for an extended period, highlighting the importance of continuously monitoring ADR spreads over the next 2-3 months to seize the opportune entry timing.
Since all these carry single-stock futures, a flexible setup targeting this spread can be designed, ideally incorporating currency hedges.

In this insight, we discuss near-term momentum trading opportunities among the top 50 stocks in KOSPI with highest short interest ratios.
Given the recent temporary ban on stock short selling in Korea, there is likely to be increased volatility in the stock market.
We have identified 10 companies in particular that have high short interest ratios, among the worst performing stocks YTD, but with strongest share price performance in the past two days.

Ecopro Materials reported disappointing IPO book building results. IPO price has been finalized at 36,200 won, which is at the low end of the IPO price range.
The demand ratio was 17.2 to 1 which was low. Total IPO offering amount was 419 billion won. Ecopro Materials will start trading on 17 November.
Our base case valuation of Ecopro Materials is target price of 37,436 won per share, which is 3.4% higher than the IPO price. We remain negative on this IPO.

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