NPS buys more Hyosung Heavy Industries, LS Electric shares in Q2

National Pension Service (NPS) of South Korea increased investments in local machinery, shipbuilding and semiconductor stocks in the second quarter of this year, according to its regulatory filings to Korea Exchange on Tuesday. The world’s third-largest pension fund reduced exposure to entertainment, leisure and cosmetics in the April-June period.  

The pension giant, managing 975.6 trillion won ($750.5 billion) in assets as of April 30, adjusted its exposure to 76 stocks in the main bourse Kospi and 32 in the junior market Kosdaq during the second quarter.     

It owns domestic public equities worth 140.7 trillion won as of end-April. The pension fund is one of the most influential investors in the Korean stock market, holding more than a 5% stake in each of 306 listed companies.

INCREASE IN MACHINERY, SHIPBUILDING, CHIPS

The institutional investor raised its ownership in Hyosung Heavy Industries Corp., a global supplier of power plant equipment, by 4.18 percentage points to 11.21%. The increase is the largest the pension fund has ever made during the April-June period.

The unit of Hyosung Group, a chemicals-to-construction conglomerate, is set to boost performance with rising demand for its power transformers used at renewable energy plants in North America.   

The company will report 44.7 billion won in the second-quarter operating profit, up 6.1% on-year, according to a consensus estimate from financial research firm FnGuide Inc. The machinery producer’s stock closed at 124,300 won on Wednesday, surging 38.1% over the past month in a rosy outlook for its performance.

NPS also increased its holdings in LS Electric Co., a leading automation equipment maker, from 11.94% to 12.97% in the second quarter. The company is expanding sales through global projects, winning a £73.6 million ($93.5 million) order in April to build energy storage systems in the UK.

The firm’s second-quarter operating profit will jump 25.5% on-year to 75.4 billion won, according to FnGuide forecast.

NPS also purchased more construction equipment stocks between April and June. It expanded its holdings in Doosan Bobcat Inc. from 7.12% to 8.33%. The equipment unit of power plant builder Doosan Enerbility Co. is expected to report 360.5 billion won in operating profit for the second quarter, up 16.4% on-year, FnGuide said.

The pension fund also raised its ownership in HD Hyundai Construction Equipment Co. from 7.06% to 8.13% and holdings in HD Hyundai Infracore Co. from 9.39% to 10.44%. HD Hyundai Construction and Infracore will respectively post 108% and 73% spikes on-year in their second-quarter operating profits, FnGuide projected.

Demand for construction machinery and equipment is on a sharp rise in North America, thanks to huge investments in infrastructure such as roads, railroads, water and power supplies, said IBK Securities Analyst Lee Sang-hyun.

NPS additionally invested in semiconductor shares that are expected to rebound. It raised its holdings in Haesung DS Co., a chip component maker, from 8.23% to 10.41%, and increased ownership in LX Semicon Co., a leading chip design firm, from 4.98% to 7.22%.

The pension fund bought more stakes in shipbuilding and marine engine. It raised its shareholdings in HD Korea Shipbuilding & Offshore Engineering Co. from 5.74% to 6.8% and stocks in HSD Engine from 4.95% to 6.11%.

DIVESTMENT IN ENTERTAINMENT, LEISURE, BEAUTY

NPS reduced investments in Contentree JoongAng, the operator of cinema chain Megabox, by 4.41 percentage points to 6.54% amid a downturn in the movie theater industry. It is the biggest decline in the pension fund’s shareholding adjustments during the second quarter.

The fund cut its ownership in some cosmetics, leisure and entertainment stocks as China’s reopening shows limited effects on the shares. Its holdings in LG Household & Health Care Ltd. declined from 8.03% to 6.99%. Its ownership in Amorepacific Corp. fell from 7.39% to 6.35%.

It also divested itself of some Hotel Shilla stocks, adjusting its holding rate from 10.67% to 9.42%.

NPS sold some K-pop agency stocks that surged in the first half of this year. It decreased holdings in YG Entertainment Inc. from 9.41% to 7.12%, as well as cut the rate in JYP Entertainment Corp. from 5.07% to 4%.

*Updated with the number of companies with more than 5% holdings

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

Jihyun Kim edited this article.