NPS boosts holdings in parts, materials, leisure stocks

The National Pension Service has raised exposure to parts, materials and leisure stocks in South Korea that had underperformed the broader markets, while reducing its stake in 43 large caps, including Hyundai Motor Co.

In a recent portfolio reshuffle, the $700 billion pension scheme has boosted its holdings in 20 domestic companies among the stocks in which it had already owned more than a 5% stake, according to its regulatory filings on Tuesday.

They include electronics parts maker Samwha Capacitor Co., Daewoo Engineering & Construction Co., and materials producers, including Namsun Aluminium Co., SK D&D Co., Wonik Materials Co., Hana Materials Inc., RFHIC Corp. and Nepes Co., as well as LG Innotek Co.

In particular, NPS has increased its investments significantly in casino operator Grand Korea Leisure Co. (GKL) and Hotel Shilla Co., hit hard by the global pandemic. Its stake in GKL reached 12.77% by the end of December, versus 9.81% in early September of last year. Its holdings in Hotel Shilla Co. increased to 11.07% from 9.86% during the period.

By contrast, the South Korean pension has capitalized on heavy gains in 43 large caps, including software developer Hyundai Autoever Corp., energy company Hanwha Solutions Corp. and textile producer Hyosung TNC Corp, as well as Hyundai Motor and JYP Entertainment.

Between May and December 2020, Hyundai Motor shares had more than doubled, with the share price of Hanwha Solutions more than trebling.

The world's No. 3 pension fund also took profits from shares in Kumho Petrochemical Co. and internet portal Naver Corp., as well as food companies, including Sajo Industries Co., Pulmuone Co. and Nongshim Holdings Co. 

RETURNS FROM SEOUL SHARES BEAT GLOBAL STOCKS'

Currently, NPS invests in 1,093 stocks in Korea, worth a combined 143.9 trillion won. Samsung Electronics Co. accounts for 27%.

Last year, NPS earned a 5.8% return from domestic equities as of the end of October, beating a negative 1% return from global stocks during the period. Domestic equities made up 18% of its 772 trillion won ($706 billion) in assets under management as of the end of October 2020, while overseas equities took a share of 22.3%.  

“Despite the ongoing impact of the COVID-19, local stock markets have been on a bull run on expectations of economic recovery, led by major companies,” said an NPS source. “On the contrary, global stock markets remained weak due to concerns about pandemic-caused lockdowns and uncertainties over the US presidential election.”

With Seoul stock markets hitting fresh records since late last year, NPS and other pension funds offloaded a combined 2.5 trillion won in Korean shares last month, according to the Korea Exchange on Jan. 7.

Retail investors may take a lesson from the NPS’ recent portfolio reshuffle, said Hana Financial Investment analyst Lee Kyung-soo, advising them to focus on the stocks dumped by institutional investors over the past year to avoid their heavy profit-taking when markets turn lower. 

“Seasonally, stocks neglected by institutional investors tend to outperform both at the start and the end of the year,” he said.

On Friday, the benchmark Kospi index closed up 4% at its highest-ever closing level of 3,152.18, just off the intraday peak of 3,161.11. Foreign investors were the key buying group, purchasing a net 1.6 trillion won on the main bourse. 

Write to Jae-won Park at wonderful@hankyung.com
 

Yeonhee Kim edited this article.