National Pension Service Bought Chemical and Defensive Stocks in Q2

Looking at Stocks Bought in April-May
Daehan Yuhwa Shares Increased the Most
Hite Jinro and Telecom Stocks Also Bought
Samsung Electronics and SK Hynix Expanded
Untact Stocks Increased Naver Shares

[Asia Economy Reporter Park Jihwan] It has been revealed that the National Pension Service (NPS) has focused on buying chemical-related stocks in the second quarter of this year. Amid growing global uncertainties due to the spread of the novel coronavirus disease (COVID-19), the NPS also showed a tendency to pay attention to defensive stocks such as telecommunications. This trend contrasts with the first quarter, when semiconductor and pharmaceutical sectors were mainly purchased.

According to financial information provider FnGuide on the 26th, among 28 stocks whose shareholding ratio by the NPS increased from May 1 to June 25 (based on stocks with over 5% ownership), eight were chemical-related stocks. Daehan Petrochemical saw the largest increase in NPS holdings during this period. The NPS's stake in Daehan Petrochemical rose by 2.15 percentage points from 8.69% at the end of March to 10.84% on June 25. Holdings in Lotte Chemical (8.70%→9.73%), SK Chemicals (8.98%→9.95%), Kumho Petrochemical (9.17%→10.01%), and LG Chem (10.22%→10.36%) also increased.

The NPS's purchases of chemical stocks have continued since the first quarter. In Q1, the NPS increased its holdings in SK Chemicals (6.89%→8.98%), Hwasung (5.20%→7.29%), and AK Holdings (5.01%→6.02%). This is due to growth potential in the secondary battery market and expectations of improved profitability from the decline in international oil prices.

Lee Hee-cheol, a researcher at KTB Investment & Securities, stated, "The domestic chemical industry faces both benefits from low oil prices and demand contraction pressures due to COVID-19. However, in the case of batteries, despite temporary demand shrinkage caused by COVID-19, it is expected to enter a full growth phase in the second half of the year."

In addition, the NPS made large purchases of defensive stocks in the second quarter. The stake in Hite Jinro, a representative food and beverage stock, increased by 1.08 percentage points over three months, and KT&G's stake rose by 0.61 percentage points. Telecommunications sectors such as SK Telecom, LG Uplus, and KT, traditionally considered defensive stocks, were also heavily purchased. This is interpreted as due to their stable earnings and growth potential in the 5G industry. The NPS expanded its holdings in SK Telecom (11.26%→11.60%), LG Uplus (10.98%→11.90%), and KT (13.77%→13.87%).

Large semiconductor stocks such as Samsung Electronics and SK Hynix, expected to see increased demand due to the spread of non-face-to-face activities, were also targets of increased investment by the NPS. Samsung Electronics' stake rose from 11.08% at the end of March to 11.19%, and SK Hynix's from 11.08% to 11.20%. However, holdings in some semiconductor materials and related equipment sectors, such as Hanmi Semiconductor (10.29%→10.08%) and Wonik Materials (8.69%→7.53%), decreased.

There was no expansion of investment in the pharmaceutical sector, which had reached 11 stocks in the first quarter. In the second quarter, the NPS only increased its stake in HanAll Biopharma by 0.77 percentage points. In Q1, the NPS expanded investments in Green Cross (8.96%→10%) and Chong Kun Dang Holdings (7.41%→8.41%), which were expected to improve earnings despite the spread of COVID-19. Compared to the first quarter, when Handok (6.19%), Amicogen (6.09%), and Boryung Pharmaceutical (5.07%) were newly included in the NPS portfolio, this shows a clear difference in investment temperature.

Among the recently spotlighted untact (non-face-to-face) stocks, choices diverged. The NPS increased its stake in Naver, a representative untact stock, by 0.23 percentage points but reduced its stake in Kakao by 0.04 percentage points.

Stocks whose holdings were reduced by the NPS in the second quarter included SK Innovation (10.39%→10.29%), Korean Air (9.98%→8.94%), and Shinsegae I&C (12.53%→5.26%). In the cases of SK Innovation and Korean Air, this appears to be due to the judgment that poor earnings are inevitable for the time being, as they recorded operating losses of 1.7752 trillion KRW and 56.6 billion KRW respectively in the first quarter of this year.