Korea’s state fund increases stake in nuclear power, IT stocks

The National Pension Service headquarters [Courtesy of NPS]

The National Pension Service (NPS), the largest institutional investor in Korea, recently reduced its stake in department store and liquor stocks, which are sensitive to slowing consumption, while increasing its shares in nuclear power and information technology (IT) sectors.

NPS reduced its stake in Hyundai Department Store Co. to 6.93 percent on April 4 from 8.03 percent in January and HiteJinro Co. to 5.7 percent on April 28 from 9.29 percent last year, according to a regulatory filing Wednesday.

Stock market analysts see the move as NPS’s response to slowing consumption. The market also seems to recommend a conservative approach to these stocks. According to market tracker FnGuide, four securities firms lowered their target prices for Hyundai Department Store and seven firms slashed their target prices for HiteJinro last month.

The market expects Hyundai Department Store to be burdened by the boom it enjoyed last year and set a goal of maintaining the level of earnings from the previous year. “The growth rate of luxury goods at Hyundai Department Store is expected to be limited,” said Seo Jung-yeon, a wholesale and retail analyst at Shinyoung Securities Co.

Analysts also predicted that shrinking consumption and overheated competition in the liquor market could hinder liquor companies’ earnings. Jang Ji-hye, an analyst at DS Investment & Securities Co., noted that the launch of new products and intensifying competition amid the slowdown in the liquor market could increase the companies’ burden of production and promotion costs.

NPS also lowered its stake in Hanwha Aerospace Co., a defense company whose stock price soared this year, to 9.12 percent on April 6 from 10.13 percent in September and slashed its stake in Shinhan Financial Group Co., to 7.76 percent from 8.76 percent.

On the other hand, it increased its stakes in nuclear power stocks, which are one of the largest beneficiaries of the Yoon Suk Yeol administration’s policy to export nuclear power plants. NPS raised its stake in Doosan Enerbility Co., the country’s biggest maker of nuclear reactors, to 6.55 percent on April 25 from 5.53 percent in April last year.

Doosan Enerability drew attention during Yoon’s recent state visit to the U.S. by signing a memorandum of understanding with NuScale Power Corp., a U.S. company engaged in designing and marketing small modular reactors (SMRs), and the Export–Import Bank of Korea to strengthen collaboration in manufacturing and supplying SMRs.

“Doosan Enerability will expand its business in various fields, including contracts for units 3 and 4 of Korea’s Shin Hanul nuclear power plant, overseas nuclear power plants, SMRs, and gas turbines,” said Lee Dong-heon, a researcher at Shinhan Securities Co.

Meanwhile, the NPS also increased its stake in LG Innotek Co., an information technology component unit of LG Group, to 10.13 percent from 9.04 percent. Experts say that LG Innotek could achieve a rebound in earnings in the second half of the year in line with the launch of a new product by Apple Inc., its major customer.