Korean pension funds on over 1-month Kospi selling streak

The National Pension Service and other South Korean pension funds have offloaded a net 9.9 trillion won ($8.9 billion) worth of shares on the country’s main stock market since late December of last year, marking their largest amount of net selling over such an extended period.

They turned net profit takers mostly through program trade, after their domestic stock holdings reached the proportions set for this year in the bullish market. For the time being, Korean pension funds are likely to continue their selling spree, in line with their 2021 investment plans. They lowered the proportion of domestic stocks to below 17% from last year's 17.3% on average.

On Feb. 4 alone, domestic pension funds sold a net 376.2 billion won ($336.3 million) worth of shares listed on the Kospi, in their 28th consecutive trading session of net selling. During the period, the pension funds dumped a net 9.9 trillion won of shares on the main bourse. 

On Thursday, Korean institutional investors, including the pension funds, sold a net 1.8 trillion won of Kospi-listed shares, sending the benchmark Kospi index 1.34% lower to close at 3,087.62.

It was the second time that domestic pension funds remained net sellers in the Kospi for 28 straight sessions, since the period between Aug. 3 and Sept. 9, 2009. At the time, they sold a net 2.6 trillion won.

Samsung Electronics was the main target of their program trading. They sold more than a net 3 trillion won worth of Samsung Electronics shares with a transaction volume of 262 million shares in the past 28 trading sessions. That compared with foreign investors' net selling of 6 trillion won in Samsung shares during the same period, but in a smaller trade volume.

The heavy transaction volume means Korean pension funds engaged in short-term trade, or repeatedly buying and selling the stock in a short period of time.

“Asset management firms entrusted by NPS cannot buy shares beyond the designated proportion, but they are obliged to make a profit. Under such circumstances, they cannot help but focus on short-term trading,” said an asset management head.

Write to Yun-Sang Ko at kys@hankyung.com
Yeonhee Kim edited this article.