Pension funds turn away from POSCO Holdings, buy cosmetics, IT stocks

[Photo by Kim Ho-young]

South Korean pension funds, including the National Pension Service (NPS), have been selling their stake in POSCO Holdings since July and instead have turned net buyers of cosmetics stocks such as those of Amorepacific Corp.

According to the Korea Exchange on Tuesday, the National Pension Service Investment Management, an investment body under the NPS, sold 650,000 shares of POSCO Holdings worth 400 billion won ($299 million) for 18 trading days until August 14.

NPS held a 9.1 percent stake in POSCO Holdings at the end of last year, but projections indicate that the stake has diminished to 7 percent this year due to the recent profit-taking activity.

NPS’s net selling comes amid growing concerns about the overvaluation of POSCO Holdings, which have been triggered by Morgan Stanley’s report published in July.

The investment bank firm recommended the sales of POSCO Holdings shares, citing the company‘s overblown business in lithium-related projects.

There has recently been a significant plunge in the price of lithium carbonate in China. The latest shift triggered a reevaluation of the market value of POSCO Holdings’ lithium-related operations, given the intrinsic link between declining lithium prices and the overall value of their lithium business.

POSCO Holdings, on July 11, set the preliminary price of lithium at $30,000 per ton in its announcement for expansion of lithium projects. Though the price was part of its conservative approach to the projects, the recent plunge in China‘s lithium prices poses a threat to the target.

The Korean pension fund now turns its focus to the sectors that expect upbeat earnings forecasts following China’s resumption of group tours to Korea. Even before the official announcement from the Chinese government, the NPS began buying the stocks, including those of Amorepacific, Hotel Shilla Co., and LG Household & Healthcare Co.

The NPS were net purchasers of Amorepacific between July 26 and August 14. It poured nearly 100 billion won into the cosmetic stock, which led to a surge in the stock price.

Shares of Hotel Shilla also rose to 91,000 won on August 14 from 68,200 won on July 26 on upbeat buying.

The NPS, in the meantime, also purchased information and technology (IT) stocks, such as those of Samsung SDS Co. and Naver Corp. The institutional investor, however, net sold automotive stocks, including Kia Corp.