NPS fills basket with China reopening, cosmetics shares; tech firms sold

South Korea’s National Pension Service (NPS) sold electronics, information technology and content-related shares in the third quarter, and filled its basket with stocks related to China’s reopening, including cosmetics and tourism.

According to the Financial Supervisory Service, the state pension fund recently disclosed details of its third-quarter portfolio readjustments.

The disclosure covered 117 stocks owned by the NPS – 87 stocks traded on the main Kospi bourse and 30 stocks listed on the tech-heavy Kosdaq.

The NPS, the world’s third-largest public pension fund with assets under management reaching 983.1 trillion won ($741.9 billion), slashed its LG Electronics Inc. holdings by 1 percentage point to 7.47% as of July 31.

It lowered its stake in LG Innotek Co., an electronics parts maker, to 10.48% as of Sept. 12, down from 11.48% earlier.

The fund, one of the largest institutional investors in Korea, also sold PI Advanced Materials Co. by 1.07 percentage points, Hanmi Semiconductor Co. by 10.9 percentage points, Hana Micron Inc. by 1.02 percentage points and Haesung DS Co. by 0.02 percentage point.

Industry watchers said the NPS has unloaded electronics shares due to a widespread industry view that the recovery in demand for home appliances and smartphones will be slower than expected.

The pension fund sold chip-related shares to book profits from recent gains in artificial intelligence-themed stocks.

SK RENT-A-CAR, MOST SHORTED

The NPS also lowered content, broadcasting and construction stocks.

Its ownership of Contentree JoongAng Co. was slashed to 4.52% from 6.54% earlier.

Shares of YG Entertainment Inc. and SBS Media Holdings Co. were each slashed by 1.08 percentage points.

NPS' stake in DL E&C Co. fell to 9.78% from 10.82%.

SK Rent-a-Car Co. shares were the most shorted by the NPS in the third quarter. Its holdings of the stock dropped to 0.6% as of Sept. 13, down sharply from 8.45% earlier.

The divestment came after SK Networks Co., the car rental firm’s parent, said it would delist the subsidiary after fully acquiring it next year.

The fund’s stake in Doosan Corp. fell to 7.4% from 11.7% as the stock rose sharply ahead of the initial public offering of its unit Doosan Robotics Inc. on Oct. 5.

CHINA REOPENING, COSMETICS STOCKS ON BUY LIST

The NPS has raised its stake in companies related to China’s reopening, including cosmetics and tourism shares.

Its stake in Hotel Shilla rose to 12.93% from 9.42% while CJ Corp., the parent of health and beauty store chain CJ Olive Young, was raised to 11.01% from 7.7%.

The fund’s holdings of Amorepacific Corp. and Amorepacific Group increased by 1.05 percentage points and 2.06 percentage points, respectively.

Its stakes in cosmetics firms Kolmar Korea, Cosmecca Korea Co. and CLIO Cosmetics Co. were hiked by 1.02 percentage points, 3.42 percentage points and 2.12 percentage points, respectively.

Q4 OUTLOOK

Industry officials said the state pension fund’s stock buying in the fourth quarter won’t be as strong as the third quarter, given its asset allocation targets.

According to the NPS’ 2023 asset allocation plan, local stocks account for 15.9% of its entire portfolio. As of the end of July, the fund’s holdings of domestic stocks accounted for 14.9% of its portfolio.

“The NPS may be tempted to sell part of its stock holdings in the coming months. We don’t expect the fund’s role in the fourth quarter to be as great as in the previous quarters,” said an executive at a local asset management firm.

Write to Tae-Ung Bae at btu104@hankyung.com

In-Soo Nam edited this article.