Gap Trades in Korean Prefs Vs Common Share Pairs in 2Q 2024

• In this insight, we discuss numerous gap trades involving Korean preferred and common shares in 2Q 2024.

• Although the discount on the preferred shares versus the common shares has been gradually narrowing in the past decade, this discount increased from end of 2021 to 1 April 2024.

• On a longer timeframe (3-4 years), we believe this discount could narrow further to the 20-25% range, which provides additional opportunities for the Korean preferred shares to further make gains.

Among the 28 major pair trades (prefs vs. common shares), 14 of the pref stocks outperformed their common shares counterparts and 14 of the common shares outperformed their pref shares counterparts from 3 January to 1 April 2024.

• From 3 January to 1 April 2024, the preferred stocks of Amore Pacific Corp and Hyundai Motor displayed sharply higher share price appreciation relative to their common counterparts.

• In the same period, the common stocks of CJ Corp, Doosan Corp, and S-Oil displayed significantly higher share price appreciation relative to their preferred counterparts.

Furthermore, among the 28 companies listed below, we see some attractive longer-term opportunities for Amorepacific Corp (090430 KS), Amorepacific Group (002790 KS), Doosan Fuelcell, LG Electronics (066570 KS), and CJ Cheiljedang (097950 KS) which have especially high discounts for the preferred shares versus their counterpart common shares.