Large institutional investors exit from KEPCO under heavy losses

[Courtesy of KEPCO]

Following the National Pension Service (NPS), major foreign investment companies such as JP Morgan and BlackRock have reduced their holdings in Korea’s state power utility Korea Electric Power Corp., which is struggling with significant losses.

According to sources on Thursday, JP Morgan cut down on its holdings of KEPCO American Depositary Receipts (ADRs) to 281,824 shares in the first quarter of this year from 333,064 shares. BlackRock, the world’s largest asset management company, also cut its stake to 1.71 million shares from 2.15 million shares. Vanguard Group recently sold 23,993 KEPCO shares.

KEPCO is listed on the U.S. stock market in the form of ADRs, and its stock price trend is similar to that of KEPCO listed on the Korean main bourse.

Earlier, the NPS reduced its holdings in KEPCO shares on the Korean stock market. According to the electronic disclosure of the Financial Supervisory Service, the NPS recently sold around 3.49 million KEPCO shares, reducing its ownership to 6.59 percent from 7.14 percent.

Moreover, the NPS adjusted its purpose of holding KEPCO shares from general investment purpose to simple investment, signifying a focus on profit taking rather than active exercising of shareholder rights.

In contrast, Morgan Stanley increased its holdings in KEPCO. In the first quarter, the New York-based investment bank purchased an additional 956,072 KEPCO ADRs. The move is interpreted as a response to the consistent downward trend of KEPCO’s stock price, prompting it to engage in buying at lower prices.

Morgan Stanley’s holdings of KEPCO ADRs now stand at 6.68 million shares. Morgan Stanley is also the investor with the largest holdings of KEPCO ADRs.

KEPCO’s stock price has declined by 69 percent since reaching a historic high in 2016. From its peak at 63,700 won, the stock price is currently at 19,310 won. Despite the benchmark Kospi’s 16 percent rise this year, KEPCO’s stock price lost 11 percent during the same period.

According to financial information provider FnGuide, KEPCO is estimated to face a loss of around 7.8 trillion won this year. Last year, it recorded an operating loss of 32 trillion won ($25 billion). The forecast for net profit this year also indicates a continuing deficit of 7.5 trillion won.

However, the recent government-led electricity rate hikes provide a positive outlook for improved profitability, while brokerages are downgrading their investment opinions on KEPCO to neutral from buy as earnings uncertainty remains. KB Securities Co. set a price target of 19,000 won, which is lower than the current share price.