Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

I investigate special situations, pairs, and index rebalancing trades in Korea.

Korea / Special Sits, Pairs, Index Rebalancing

SK Innovation Split Overview & Implications

SK Innovation: To Split SK Battery & SK E&P Business Units

SKIET Lockup Releases & Float Estimations Ahead of MSCI & KRX BBIG Rebalancings

WISE Battery Index Rebalancing Results & What's Next in the Upcoming Rebalancing

MSCI Standard Korea QIR Adds: SKIET & Ecopro BM Exit Points

Float Confusions for Likely Adds at MSCI Std Korea QIR: SKIET, Ecopro BM, & Kakao Games

Battle Lines Drawn As BABA Builds Out First/Last-Mile Capacity; But Who Will Fund 75+ Bn CNY CapEx?

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Event-Driven

<p>SKIET shares fell sharply in the afternoon market. The total decline today was 7.66%, the largest one-day decline excluding the listing date.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/221/884/original/Screen+Shot+2021-08-03+at+3.24.28+AM.png?1627975515" class="editor-image img-responsive" data-smartkarma-image-id="221884"></figure></section><p><strong>So, what is the reason for the sudden drop in the stock price today?</strong></p><div class="content-highlight"><p>Since SKIET's stock price has risen so much recently, it can become a target for short selling at any time, and it is difficult to see today's stock price correction as shocking. Nevertheless, the stock fell in the afternoon market for a very short time, and there is no noticeable bad news (at least on the surface). Therefore, it is necessary to look at what might have caused this stock price movement.</p></div><h2>1. LG Chem starting the separator business</h2><p>Then, from a fundamental point of view, some on the local street think that last week's news about LG Chem starting the separator material business might have been reflected in SKIET's share price today. LG Chem acquired the separator business from LG Electronics for ₩525B ($458.5M) to target the EV battery separator market, in which it will directly compete against SKIET.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/221/886/original/Screen+Shot+2021-08-03+at+3.32.02+AM.png?1627975944" class="editor-image img-responsive" data-smartkarma-image-id="221886"></figure><p></p></section><p><strong>However, it seems that this level of business concern shouldn't be substantial enough to abruptly bring the stock price down, like a 7% movement we saw this afternoon. And the time window for this news to be reflected in the share price was quite long, but I don't see a clear reason why it should be reflected suddenly this afternoon.</strong></p><h2>2. Bad news leaked from inside SKIET about tomorrow's 2Q earnings?</h2><p><strong>Tomorrow (August 4th) is SKIET's 2Q earnings call. So, were some negative news related to 2Q earnings leaked to the market before the announcement?</strong></p><p>At least, on the surface, there doesn't seem to be any bad news from inside SKIET yet. Of course, there is a possibility that some negative news related to 2Q earnings were leaked to the market before the announcement. Such has often been the case in the local market.</p><p>But if this is the case, there is something a little odd. If bad news related to performance is leaked to the market in advance, the short-selling volume tends to surge. Since this news needs to be reflected in the market within a short period of time, it invites more short-sellers who tend to react more promptly than long position holders who take longer to decide on closing long positions.</p><p>Just now, the KRX released short selling data, which shows SKIET"s short-selling today was only 0.88% of the total trading volume, almost the lowest level in recent weeks. The actual short selling volume to which the uptick rule is applied is also almost at its lowest level at 3,500.</p><p><strong>Therefore, it is difficult to believe that this afternoon's share price movement is due to the leakage of bad news related to tomorrow's earnings.</strong></p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/221/894/original/image_42343865721627977375974.png?1627977377" class="editor-image img-responsive" data-smartkarma-image-id="221894"></figure>

SKIET shares fell sharply in the afternoon market. The total decline today was 7.66%, the largest one-day decline excluding the listing date.So, what is the reason for the sudden drop in the stock price today?Since SKIET's stock price has risen so much recently, it can become a target for short selling at any time, and it is difficult to see today's stock price correction as shocking. Nevertheless, the stock fell in the afternoon market for a very short time, and there is no noticeable bad news (at least on the surface). Therefore, it is necessary to look at what might have caused this stock price movement.1. LG Chem starting the separator businessThen, from a fundamental point of view, some on the local street think that last week's news about LG Chem starting the separator material business might have been reflected in SKIET's share price today. LG Chem acquired the separator business from LG Electronics for ₩525B ($458.5M) to target the EV battery separator market, in which it will directly compete against SKIET.However, it seems that this level of business concern shouldn't be substantial enough to abruptly bring the stock price down, like a 7% movement we saw this afternoon. And the time window for this news to be reflected in the share price was quite long, but I don't see a clear reason why it should be reflected suddenly this afternoon.2. Bad news leaked from inside SKIET about tomorrow's 2Q earnings?Tomorrow (August 4th) is SKIET's 2Q earnings call. So, were some negative news related to 2Q earnings leaked to the market before the announcement?At least, on the surface, there doesn't seem to be any bad news from inside SKIET yet. Of course, there is a possibility that some negative news related to 2Q earnings were leaked to the market before the announcement. Such has often been the case in the local market.But if this is the case, there is something a little odd. If bad news related to performance is leaked to the market in advance, the short-selling volume tends to surge. Since this news needs to be reflected in the market within a short period of time, it invites more short-sellers who tend to react more promptly than long position holders who take longer to decide on closing long positions.Just now, the KRX released short selling data, which shows SKIET"s short-selling today was only 0.88% of the total trading volume, almost the lowest level in recent weeks. The actual short selling volume to which the uptick rule is applied is also almost at its lowest level at 3,500.Therefore, it is difficult to believe that this afternoon's share price movement is due to the leakage of bad news related to tomorrow's earnings.

SK IE Technology

What's Going on at SKIET?