In today’s briefing:
- Korea Short Sell Ban: Background, Manipulation, Holdings, Flows, Short Interest, Implications
- Trading Opportunities from Korea’s Sudden Short Selling Ban & Resulting Futures Backwardation
- Full Transcript of Korea FSC Briefing on Sudden Short-Selling Ban, Including Key Trading Insights
- Lee Family to Sell 2.6 Trillion Won in Samsung Companies to Pay for Inheritance Taxes
- Chindata (CD US): Maximum Dissent Condition in Focus as Oasis Builds a Stake
- EQD | KOSPI 200 SHORT-SELLING BAN: Upward Push and Pullbacks
- Descente (8114) : Itochu Still Buying and ANTA Gives You Earnings Hints
- Samsung Founder Family’s Pre-Announced Block Deals: Contract Terms & Fresh Contextual Conditions
- A/H Premium Tracker (To 3 Nov): Volatility Off, Spreads Jumpy, Short Sellers a NatSec Concern?
- Merger Arb Mondays (06 Nov) – Haitong Intl, NWS, Poly Culture, Eoflow, Origin, Azure, Tietto
Korea Short Sell Ban: Background, Manipulation, Holdings, Flows, Short Interest, Implications
- Korea banned all short selling in March 2020 and resumed short selling only on KOSPI 200 and KOSDAQ 150 index constituents in May 2021.
- News reports indicate that there could be another short sell ban as soon as the coming week. Indications are that the ban could last 6 months.
- There are many implications of a total short sell ban including futures backwardation, market manipulation, and no emerging to developed market promotion.
Trading Opportunities from Korea’s Sudden Short Selling Ban & Resulting Futures Backwardation
- We should consider the complete prohibition of short selling for the next six months as practically finalized.
- Following the individual stock short selling ban, both position hedging and short demand will inevitably shift to the futures market, consequently inducing unavoidable immediate backwardation.
- We should design a setup that not only actively seizes sell arbitrage opportunities but also effectively capitalizes on the downward price pressure stemming from spot selling.
Full Transcript of Korea FSC Briefing on Sudden Short-Selling Ban, Including Key Trading Insights
- There seems to be no immediate requirement to close existing contracts. However, even the chairman of the Financial Services Commission was unable to offer a definitive answer.
- The comprehensive investigation and prohibition of the customary naked short selling could lead to a rapid decline in overall market liquidity.
- The first is the short-term view, focusing on futures backwardation, and the second is the medium to long-term perspective, examining how the overall market liquidity decline will affect market flows.
Lee Family to Sell 2.6 Trillion Won in Samsung Companies to Pay for Inheritance Taxes
- Lee family plans to sell additional 2.6 trillion won worth of Samsung Group companies as part of their fourth installment of inheritance taxes.
- This inheritance tax share sale is likely to have a negative impact on Samsung Electronics, Samsung C&T, Samsung SDS, and Samsung Life Insurance.
- This may be just a coincidence but the regulators announced today a temporary ban on stock short selling which should help the Lee family to unload their shares.
Chindata (CD US): Maximum Dissent Condition in Focus as Oasis Builds a Stake
- Chindata Group (CD US)’s US$8.60 per ADS offer from Bain Capital is conditional on dissenting shareholders representing less than 12% of outstanding shares.
- Oasis Management, an activist fund, recently disclosed a shareholding representing 65.9 million ordinary shares, 8.99% of outstanding shares and 1.24% of voting interest.
- Precedent transactions where the dissent condition was exceeded suggest two possibilities – the offeror waives the condition or persuades sufficient shareholders to withdraw as dissenters.
EQD | KOSPI 200 SHORT-SELLING BAN: Upward Push and Pullbacks
- Banning short-selling for stocks will provide some propulsion to the KOSPI 200 INDEX but inevitably there will be pullbacks when strong resistance areas are reached.
- The index is joining a wide global equities bounce, it is not recommended to go SHORT soon. There is a chance it may pullback briefly this week (buy the dip?)
- Our models say the index can rise from 2 to 4 weeks, before reversing: resistance will be met at 320, 328 and (hard to reach) 349.
Descente (8114) : Itochu Still Buying and ANTA Gives You Earnings Hints
- Descente Ltd (8114 JP) saw Itochu report it had continued its streak of consecutive days of buying, extending it to 115. Now they own 44.1% of voting rights.
- ANTA gave hints to the progress of Descente China in the Interim Results, and Q3 Operational Update. Descente analysts are 20% ahead of guidance, but they’re probably low still.
- Descente reports Q2 tomorrow. I expect the numbers and presentation to surprise at the Net Profit level. I expect a forecast revision.
Samsung Founder Family’s Pre-Announced Block Deals: Contract Terms & Fresh Contextual Conditions
- Considering year-end dividends, it appears likely that the trading timing might extend beyond this year. In the previous case, the trade execution timing was one month before the contract expired.
- Short selling is prohibited. However, all four companies offer single-stock futures, which provide instruments for proactive positioning. Nevertheless, aspects to consider are likely to increase regarding trading convenience and liquidity.
- The potential for inadequate liquidity might increase the discounts for these deals, potentially offering us fresh trading opportunities. We should proactively prepare trading setups that consider these contextual conditions.
A/H Premium Tracker (To 3 Nov): Volatility Off, Spreads Jumpy, Short Sellers a NatSec Concern?
- The New and Better (10 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
- Absolutely STONKING performance this past week – +1.62% Friday to Friday across 42 trades. Positive performance in every sector. Portfolio at new high. Southbound inflows. BigCapHighDiv SOE outflows.
- Short sales this week now need 100% in the account for hedge funds. And the MSS claims some are short-selling or talking bearishly on stocks for political reasons.
Merger Arb Mondays (06 Nov) – Haitong Intl, NWS, Poly Culture, Eoflow, Origin, Azure, Tietto
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads – 111 Inc (YI US), Eoflow (294090 KS), Hollysys Automation Technologies (HOLI US), Origin Energy (ORG AU), JSR Corp (4185 JP), Orecorp Ltd (ORR AU), Lithium Power.
- Lowest spreads – Azure Minerals (AZS AU), Pact Group Holdings (PGH AU), Chindata Group (CD US), Tietto Minerals Ltd (TIE AU), T&K Toka Co Ltd (4636 JP), Allkem.
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