Korean Holdcos Vs Opcos Gap Trading Opportunities in 1Q 2025

• In this insight, we highlight the recent pricing gap divergences of the major Korean holdcos and opcos which could provide trading opportunities in 1Q 2025.

• The recent martial law cancellation and numerous impeachments of acting Presidents have raised political uncertainty in Korea resulting in widening of some gaps among numerous holdcos and opcos in Korea.

• Of the 38 pair trades, 25 of them involved holdcos outperforming opcos in the past six months and the other 13 opcos outperforming holdcos in the same period.

The recent martial law cancellation and numerous impeachments of acting Presidents have raised political uncertainty in Korea in recent weeks resulting in some interesting widening of some gaps among numerous holdcos and opcos in Korea.

In the section below, we separated the pair trades into two different sections. The first table involves major opcos outperforming holdcos (regular and quasi) in the past six months. Of the 38 pair trade strategies mentioned in this insight, section I (which includes opcos outperforming holdcos in the past six months) included 13 pairs (34% of total). The section II (which includes holdcos outperforming the opcos in the past six months) involves 25 pairs (66% of total).

Among the 38 holdcos/opcos, there have been several pairs that have resulted in significant price gap widening in the past six months which could provide trading opportunities in terms of their pricing gaps closing reversal.

• Young Poong (000670 KS) vs Korea Zinc (010130 KS)- Korea Zinc's shares are up 96.9% in the past six months, sharply outperforming Young Poong Corp which is up 17.6% in the same period. This sharp underperformance by Young Poong is unwarranted, in our view, especially after the end of the proxy battle in January 2025. We expect this gap between Young Poong and Korea Zinc is likely to close further in the coming weeks.