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

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/2456" target="_blank" data-smartkarma-citation="entities:2456:1">Youngone Holdings (009970 KS)</a> is another single-sub holdco. <a href="https://www.smartkarma.com/entities/20467" target="_blank" data-smartkarma-citation="entities:20467:1">Youngone Corp (111770 KS)</a> is the largest sub that accounts for 70% of Holdco NAV. Youngone is one of Korea's two largest OEM apparel manufacturers. On a 20D MA, they are now at 312% of σ. Current price ratio is at a 120D high. Holdco discount is 27.5% to NAV.</li>
<li>I am not seeing any substantial factor that can explain this much price divergence in the last two days. There is a growing concern over Sub's labor cost. This may explain Sub's price plunge. But this isn't enough to explain the current huge price divergence.</li>
<li>In the last 120 days, we've had a couple of radical divergences. All of these got quickly reverted to mean. I expect the same to happen this time. At this much divergence, there is a little chance of further widening. I'd go short Holdco and long Sub. Just, Holdco liquidity can be an issue here.</li>
</ul>



Youngone Holdings (009970 KS) is another single-sub holdco. Youngone Corp (111770 KS) is the largest sub that accounts for 70% of Holdco NAV. Youngone is one of Korea's two largest OEM apparel manufacturers. On a 20D MA, they are now at 312% of σ. Current price ratio is at a 120D high. Holdco discount is 27.5% to NAV.
I am not seeing any substantial factor that can explain this much price divergence in the last two days. There is a growing concern over Sub's labor cost. This may explain Sub's price plunge. But this isn't enough to explain the current huge price divergence.
In the last 120 days, we've had a couple of radical divergences. All of these got quickly reverted to mean. I expect the same to happen this time. At this much divergence, there is a little chance of further widening. I'd go short Holdco and long Sub. Just, Holdco liquidity can be an issue here.


Youngone Holdco/Sub Trade: Price Divergence Got Too Wide