Korean Prefs: LG Chem, SEC, Doosan, Marine Ins., Samsung Fire, Others

[indythinker85]

I assumed there would be general thread on this topic, cant find one but assume I missed it. Anyway, Im looking at some of the following Korean Prefs LG Chem, SEC, Doosan, Marine Ins., Samsung Fire, Hyundai Motor, Lotte Chilsung, Daesang Corp, among some others (happy to put down entire list of initial prefs) curious if anyone has looked into them and if so their thoughts. Also anyone know Fidelity rules for these securities? Thanks in advance.

[muscleman]

I assumed there would be general thread on this topic, cant find one but assume I missed it. Anyway, Im looking at some of the following Korean Prefs LG Chem, SEC, Doosan, Marine Ins., Samsung Fire, Hyundai Motor, Lotte Chilsung, Daesang Corp, among some others (happy to put down entire list of initial prefs) curious if anyone has looked into them and if so their thoughts. Also anyone know Fidelity rules for these securities? Thanks in advance.

 

Not sure if you can buy those. I tried to place an order for hyundai's GDR in london and it says it is not allowed for electronic trading. I will call fidelity on Sunday night when their global desk opens.

I am using IB right now for my individual account, so I have to call them as well.

[JBird]

There are a lot of really attractive preferreds in Korea right now. I'm interested mostly in Nexen Tire, Hyundai, and Daelim Industries. I haven't been able to invest yet but I plan to within the month. Fidelity is the only broker I've found with access to that market.

 

As a side note. I read a blurb in the WSJ a few months back on Andrew Weiss. He gave a lecture to some students and talked about Korean preferreds being the most attractive investment he's seen since the 08/09 panic.

[chmith]

Did anyone find another retail broker (I'm UK-based) that will offer access to the Korean exchange. Also, apt from the $80 fee and the commission to local brokers at Fidelity, any idea how much they shaft you on FX?

 

thanks!

[hoveite]

Charles Stanley are the only UK broker I've managed to find who will trade Korean stocks for a retail client. They are expensive but since I like to invest in tax wrappers like ISAs and SIPPs they seem my only choice. They also aren't open during Korean trading hours so the only way to trade is to leave a limit order during UK office hours.

 

 

[Guest ajc]

 

A short update from the Investing Sidekick on the Weiss Korea Opportunity Fund (WKOF.London)

 

 

"Its first annual report has been released. I love this fund for three reasons, firstly the manager is competent and follows a shareholder friendly value investing methodology.

Secondly, the Korean stock market is one of the most moderately valued in the world, yet it has access to the booming Eastern economies and will surely benefit from the long term strength there.

Thirdly, this fund is a special situation, it is investing in preferred shares that trade at a 50% discount to the common despite having the same economic interests. I like it so much almost 10% of my portfolio is in it despite the fact it traded at a premium to NAV when I bought."

 

 

The annual report can be found here - http://www.investegate.co.uk/weiss-korea-opp/rns/annual-report/201404240700063713F/

 

 

[yadayada]

misread, but i only see top 10 holdings. Cannot find an entire list. Seems they trade like 13-14% to net asset value? I wonder how much upside there is in those stocks over the next 3 years.

 

It also seems that they are up a bit since the latest annual report?

http://www.weisskoreaopportunityfund.com/documents/FG/weiss/docs/188742_Weiss_Korea_Annual_Report_Dec_2013_FINAL_unsigned.pdf

 

So the discount might be smaller now?

[writser]

How did you get to 13 / 14%? I guess you took the NAV from the annual report. According to latest filing NAV is ~ 1.17 vs last trade at 1.225.

[yadayada]

and a 1.5% performance fee on net asset value. With all other costs that is probably close to 2% total? Are there other performance fees if net asset value goes up?

 

I guess there is a higher cost if you personally with a small portfolio buy a basket. there is a 0.2% total fee fidelity pays the broker, and there are exchange rate costs? Plus if you buy and sell stocks that decrease and increase in value to constantly have an optimal basket there will be extra costs as well. If you want to get a portfolio of like 5-6 korean stocks, you pay 80$ per stock it seems. Which is another 0.8% for buying them if you have a evenly weighed basket worth 50k$ total. So that would be 1% for buying. And also 1% for selling. Or about 2-3% total? But this could go up if you try to constantly optimize your basket.

 

But there is a 1% stamp duty on the LSE stock right? But I guess comissions are only maybe 0.1 or 0.2%. And currency exchange fees on IB are similar to that. So i guess you pay 1.2% premium on NAV, close to 2% in fees a year. 1% stamp duty, and another 0.5% for buying comissions etc. So that would be well over 4%. And if it takes long to pay off it can go up to 5-7%?

 

Seems the less you invest in korean stocks $ whise, the more attractive this fund is? Unless there is some 20% performance fee that I missed. If you have like 200k$ or more lying around for korea you might want to do it yourself tho.

 

Sounds right?

 

I forgot, but do they pay taxes over dividends? Because if your getting double taxation here that would be pretty bad and make it not worth it.

 

The amounts disclosed as taxation in the Statement of Comprehensive Income relates solely to withholding tax

levied in South Korea on distribution from Korean companies at an offshore rate of 22%

What does this mean? Is this the amount that would be withheld anyway if you invested directly?

[JBird]

There are a lot of really attractive preferreds in Korea right now. I'm interested mostly in Nexen Tire, Hyundai, and Daelim Industries. I haven't been able to invest yet but I plan to within the month. Fidelity is the only broker I've found with access to that market.

 

As a side note. I read a blurb in the WSJ a few months back on Andrew Weiss. He gave a lecture to some students and talked about Korean preferreds being the most attractive investment he's seen since the 08/09 panic.

 

Nexen Tire preferred has return 60% since that post and is still trading at 6x earnings. Some news:

 

http://www.reuters.com/article/2014/06/23/nexen-tire-europe-idUSL4N0P41OF20140623

[hoveite]

Here's an interesting quote from the head of the Korean stock exchange from a few days ago :-

 

"“We will develop new indices, such as those covering high-dividend stocks or preferred shares, to widen the base for dividend-related investment,” he said without further elaboration.

 

http://www.koreaherald.com/view.php?ud=20140720000191

 

If the Korean authorities are successful in persuading listed companies to boost their dividend payouts this should make preferred shares more attractive relative to common shares. And if the KRX wants to highlight valuations of preferred shares that doesn't sound like a bad thing for those invested in them either.

[phil_Buffett]

http://www.bloomberg.com/news/2014-07-30/dividend-fever-grips-korea-as-samsung-leads-kospi-rally.html

[investor-man]

This MoI article suggests Korean Prefs typically sell at a 30% discount to the common.

 

http://www.valuewalk.com/wp-content/uploads/2014/02/moi201401_ideas-korea.pdf

 

I've seen 10% to 15% tossed around on the board. How have people arrived at those numbers?

 

Thanks

[Packer16]

The 10 to 15% discount is based upon voting rights discounts.  Part of the 30% is due to liquidity due to the preferreds smaller trading volume versus the common.

 

Packer

[noob_investor]

Hi Packer

 

Just wondering, you invest in the korean prefs based on the discount to common only? I suppose you will also look at the fundamentals?

But does the change in accounting standards from KGAAP To KIFRS affect the data of the financial statements?

 

Thanks

[investor-man]

Korean firms’ dividend payouts to be among lowest this year

 

http://www.koreaherald.com/view.php?ud=20141210000615

 

A few months ago there were proposals to tax cash holdings on Korean companies to encourage them to pay dividends. Anybody heard where that proposal went lately? Has it just fizzled out?

[peter1234]

Korean firms’ dividend payouts to be among lowest this year

 

http://www.koreaherald.com/view.php?ud=20141210000615

 

A few months ago there were proposals to tax cash holdings on Korean companies to encourage them to pay dividends. Anybody heard where that proposal went lately? Has it just fizzled out?

 

One company solved their cash problem by massively overpaying for new headquarters.

:'(

[Packer16]

Hi Packer

 

Just wondering, you invest in the korean prefs based on the discount to common only? I suppose you will also look at the fundamentals?

But does the change in accounting standards from KGAAP To KIFRS affect the data of the financial statements?

 

Thanks

 

Yes I do invest looking at the valuation of the underlying firm.  Many of these preferreds have declined back to levels of this Spring thus are really cheap IMO.

 

Packer

[crocodon]

I assumed there would be general thread on this topic, cant find one but assume I missed it. Anyway, Im looking at some of the following Korean Prefs LG Chem, SEC, Doosan, Marine Ins., Samsung Fire, Hyundai Motor, Lotte Chilsung, Daesang Corp, among some others (happy to put down entire list of initial prefs) curious if anyone has looked into them and if so their thoughts. Also anyone know Fidelity rules for these securities? Thanks in advance.

 

I realise that I'm potentially rather late to the game on this, but interested in doing more research into Korean Prefs. Does anyone have a list of these stocks? I've been looking at the names mentioned on this board, but would like to do a brute force review of the market if possible. The only useful list I've been able to find so far is: http://www.wikinvest.com/wiki/Korea_Exchange

[vertek]

My approach was to go the following website, and grab all the tickers for the common stocks.

http://eng.krx.co.kr/m6/m6_1/m6_1_1/JHPENG06001_01.jsp

 

Having done that, then I brute-force created a list of all combinations with the last digit change to 5,7, or 9.  Then, I created a query to ping google with those ticker combinations to see what came back.  I had to clean up the list for names that hadn't traded in a while or seemed to be nonexistent.  Here is the list I came up with.  Cheers and let us know what you find!

 

- vertek

KoreanPrefs.csv

[crocodon]

Thanks, Vertek! I'll take a look.

[compounding]

Does anyone know a way to keep track of insider purchases in Korean stocks without access to a Bloomberg terminal?

[bobozou]

I have 1 general question and 2 specific questions about korean preferreds, for those who are also in this play... thanks in advance

 

 

General Question:

It seems impossible to find a news source for when corporate events happen with preferred shares.  Where do you all go to get your information on preferred-specific news/treatment?  Bloomberg/CapitalIQ?  SEC-equivalent in Korea?

 

Specific Question 1:

Hyundai Mobis Pref (012335) no longer seems to be traded.  Is this accurate?  If so, what exactly happened to these issues?  Perfect example of me not being able to find any news about 'what happened'...

 

Specific Question 2:

SK Holdings is being merged with SK C&C (http://www.businesskorea.co.kr/article/10205/sk-bigger-holdings-sk-cc-sk-holdings-merge).  I see that the common will be exchanged for new shares at 0.74 ratio, but there is no mention for the treatment of preferred shareholders.  Does anyone have any info/clarity here?

[Packer16]

As to news I use Bloomberg but there are announcements on DART.  The specifics of the preferreds are also described in the annual filings on DART. 

 

As to Hyundai Mobius, I think they still exist but are delisted due to small size.  As to SK Holdings, I would see if there is anything on DART.

 

Packer

[bobozou]

Thanks Packer!

 

As a (half-hearted) followup, did you learn to read korean and if so you have any recommendations for how to learn to read korean filings?  :)