Korean pension funds sell off Kospi, Samsung Electronics in June

[Photo by Kim Ho-young]

Korean pension funds, including the state pension fund run by the National Pension Service, have been rapidly selling off its Kospi stocks this month.

These funds have reportedly been selling Samsung Electronics Co., which reached a 52-week high on the back of the recovery in the semiconductor industry, while buying another chipmaker, SK hynix Inc. Instead of selling Kospi stocks, they have expanded their Kosdaq holdings.

According to the Korea Exchange on Thursday, pension funds have sold a net 1.13 trillion won ($857 million) in the stock market between June 1 and 28, marking the largest monthly net sale since September 2021 when it recorded a net sale of 1.68 trillion won.

Kospi fell to the 2,500 level after a brief recovery to the 2,600 level this month, likely driven by the large sell-off by pension funds, analysts say. In terms of net sales by investor type, foreign investors sold a net of 948.5 billion won in Kospi stocks during the same period, while private equity funds, insurance companies, and banks sold 218.4 billion won, 128.1 billion won, and 39.2 billion won, respectively, making pension funds the largest net seller.

While the National Pension Fund and other pension funds continue to reduce their holdings in domestic stocks and expand overseas and alternative investments, it is believed that they saw the Kospi having risen to the 2,600 range, earlier than market expectations as a chance for them to take profits.

The NPS plans to reduce its holdings of domestic stocks in its total assets from 16.3 percent at the end of last year to 15.9 percent by the end of this year, and further to 15.4 percent by the end of 2024.

“The NPS usually takes short positions for stocks that see their prices rise and long positions for stocks that see their prices fall. The pension fund must have seen an increase in its domestic stock holdings in its portfolio following the rally in the first half of this year,” said an industry insider.

[Courtesy of Samsung Electronics]

Breaking into the portfolio, the largest net sale by pension funds was Samsung Electronics stocks, with a net sale of 226.7 billion won during the same period this month. Samsung Electronics occupies a large proportion in the pension funds’ domestic stock portfolio, benchmarked on the Kospi 200. The net sale of the company is seen as a move following the stock’s 52-week high and upward trend in price this year. On Wednesday, Samsung Electronics stock further climbed up as Micron Technology Inc., the world’s third-largest memory chipmaker, announced better-than-expected performance in after-market hours.

The net sale of Samsung Electronics, however, does not imply any negative assessment on the chip industry, analysts say. In fact, pension funds bought a net 122.1 billion won of SK hynix during the same period this month, which is the largest net purchase among all stocks.

Other stocks that were net bought by these funds included Doosan Bobcat Inc., with a net purchase of 78.8 billion won, and Hybe Co., with a net purchase of 74.9 billion won. Hanwha Ocean Co. and Korea Aerospace Industries Ltd. were also targeted for increased holdings, with purchases of 53.5 billion won and 45.4 billion won, respectively.

Stocks that were net sold included Kia Corp., with a net sale of 109.4 billion won this month, followed by Kakao Corp. and LG H&H Co., with sales of 83.6 billion won and 80.6 billion won, respectively. Pension funds were also net sellers of secondary battery-related stocks, selling a net 75.3 billion won in LG Energy Solution Ltd., a net 72.9 billion won in Samsung SDI Co. and a net 71.3 billion won in POSCO Future M Co.

With the funds from the sale of their Kospi holdings, pension funds increased stakes in Kosdaq stocks, buying a net 292.8 billion won in Kosdaq stocks during the same period. Some of the significant net purchases included W-Scope Chungju Plant Co., a battery separator maker, with a purchase of 42.2 billion won, and TEMC Co., a semiconductor specialty gas company that was listed in the market in January, with a purchase of 29.6 billion won.

Meanwhile, the National Pension Fund Investment announced on Thursday that it achieved a cumulative provisional return rate of 8.63 percent until April this year, posting 79.4 trillion won in profits. With the gains, the pension fund offset most of the loss last year, which reached 79.6 trillion won.

By asset type, the highest return rate was observed in overseas stocks at 14.72 percent, followed by domestic stocks with a 13.87 percent return, overseas bonds with a 8.53 percent return, alternative investments with a 6.24 percent, and domestic bonds with a 3.58 percent return. Overseas stocks recorded a return of more than 6 percentage points higher than the benchmark index of MSCI ACWI. Domestic stocks also outperformed the benchmark Kospi’s 11.86 percent growth by more than 2 percentage points.