Korea’s pension funds shift to net buy position in Korean stocks

2020.10.13 14:53:24 | 2020.10.13 15:14:53

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South Korean pension fund managers who have stayed as heavy net sellers of local stocks over the past three months are expected to shift their position with aims to generate higher yields through stocks.

The country’s pension fund managers including National Pension Service net purchased 62.7 billion won ($545.2 million) in local stocks until Monday since markets reopened on Oct. 5 after Chuseok holidays, according to the Korea Exchange data on Monday. Other institutional investors stayed as net buyers in local stocks, purchasing 304.7 billion won worth, over the same period.

It is a shift from heavy sell-offs for the last three months. From July 1, they had net sold 4 trillion worth local stocks, with their net selling amounting to 1.3 trillion won in September alone. During the same three-month period, other institutional investors sold 10.8 trillion won in net.

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Pension fund managers tend to make a large sale of stocks towards the end of a quarter and resume purchases of equities afterwards, said Song Seung-yeon, a Korea Investment & Securities analysts. The latest selling spree made over the past quarter could have been a part of their efforts to rebalance asset portfolio to maintain the desired level of asset allocation and risks, Song added while explaining that the weighting of stocks in their portfolio had exceeded their annual target after stock markets recovered from March rout.

Their long-term strategy, however, will likely involve increasing holdings in local and foreign stocks as they seek opportunities for higher profits with interest rates at record low levels, said Lee Kyung-soo, head of Meritz Securities research center.

National Pension Service, the country’s largest instuitional investor with around 750 trillion won in assets under management, has raised its weighting target for stocks for next year by 1.4 percentage points.

By Shin Yoo-kyung and Cho Jeehyun

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