Daily Brief South Korea: POSCO Holdings, SK Innovation, Korea Zinc and more

In today’s briefing:

Trading Opportunities from the Rise of Sector Pairs Trading Using SSFs & MM Unwinding at Expiry
SK Innovation: Considering on Using Its Treasury Shares to Inject Capital into SK On
Korea Zinc: Impressive Capital Return Plans and a Big Price Gap Between Korea Zinc and Young Poong

Trading Opportunities from the Rise of Sector Pairs Trading Using SSFs & MM Unwinding at Expiry

Trading opportunities arise when overseas traders’ SSF positions face unwinding by local market makers, who enter SSF positions and take opposing spot positions, unwinding at expiry.
August-Expiry SSF data shows reverse flow impact by local market makers today, with varying degrees of impact per stock but an observable overall trend.
With ongoing market volatility in Korea, consider setups targeting price impacts from reverse flows of sector pairs trading on the next SSF expiration date.

SK Innovation is considering on using its treasury shares to inject capital into its EV battery making subsidiary SK On.
The appraisal rights exercise price is 111,943 won per share (15% higher than current price). Many minority shareholders are likely to exercise their appraisal rights in SK Innovation.
We remain Bearish on SK Innovation. We continue to be negative on the SK Innovation and SK E&S merger. Plus, we are concerned about the continued weakness at SK On.

On 7 August, Korea Zinc (010130 KS) announced several impressive capital return plan that should help to increase shareholder value.
The separation of Korea Zinc between the Choi and Jang families has been in progress in the past several years. The exact timing of when this occurs remains uncertain.
Our NAV Analysis of Young Poong is NAV per share of 470,065 won, representing a 52% upside from current levels.

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