Cosmetics and Food Lead Domestic Stock Market Gains
Outsourced Asset Managers Seem to Take Profits as Prices Rise
Major Shareholders (Over 10% Stakes) in Listed Companies Halved in 4 Years
The National Pension Service (NPS), the largest institutional investor in the domestic stock market, has been steadily reducing its holdings in food and beverage and cosmetics stocks. Cosmetics and food are the sectors with the highest growth rates in the domestic market this year. This is interpreted as partial profit-taking due to the increased value of these holdings.
According to the Korea Exchange on the 21st, the NPS recently disclosed changes in its stakes in LG Household & Health Care and Cosmecca Korea. This disclosure is required for holdings exceeding 5%. The stake in LG Household & Health Care decreased from 9.48% to 9.36%, and in Cosmecca Korea from 11.49% to 9.69%. Both companies are classified in the cosmetics sector.
Cosmetics and Food Among Top Performing Sectors... NPS 'Reducing Holdings'
The NPS has consistently reduced its holdings in cosmetics and food stocks since the beginning of this year. Among the nine cosmetics listed companies with large holdings since January, LG Household & Health Care (6.94→9.36%) was the only one to increase its stake. Clio (9.29→6.01%) and PharmaResearch (9.95→6.92%) saw their stakes decrease by more than 3 percentage points, while stakes in Kolmar Korea, C&CI International, Cosmecca Korea, and Cosmax also fell by more than 1 percentage point. There was no change in the stake in AmorePacific, the leading cosmetics stock.
The same trend was observed in food stocks during the same period. Except for Lotte Wellfood (5.00→6.05%) and HiteJinro (5.01→6.02%), all other large holdings either decreased or remained unchanged. Stakes were reduced in Samyang Foods (12.72→9.99%), Nongshim (11.71→10.04%), CJ CheilJedang (11.84→10.65%), Lotte Chilsung (10.81→9.73%), and Daesang (10.38→10.05%).
Cosmetics and food are the hottest sectors in the domestic stock market this year. They represent the highly regarded 'K-Beauty,' which has become the number one in the U.S. imported cosmetics market share, and 'K-Food,' which is breaking record export performances. According to financial information provider FnGuide, among domestic equity ETFs, the top three in terms of returns over the past three months are 'TIGER Cosmetics (56.59%)' in first place, 'HANARO Fn K-Food' (42.92%) in third place, and 'TIMEFOLIO K-Culture Active' (43.18%) in second place, which mostly includes K-Food and K-Beauty companies.
"Outsourced Asset Managers Likely Took Active Profit-Taking"
Regarding the reduction in holdings of food and cosmetics stocks, whose prices have been soaring, a former NPS official said, "Since prices have risen significantly, the pension’s outsourced asset managers appear to have taken some profits. These trades are more actively conducted by outsourced managers rather than direct management." He also added, "Even though the stake ratios were reduced, the valuation likely increased due to the large price gains." As of the end of the first quarter, the NPS’s domestic equity investment amounted to KRW 155.9 trillion, with 50.6% managed by outsourced asset managers and the remaining 49.4% managed directly.
Meanwhile, due to the reduction in holdings, the number of food and cosmetics listed companies where the NPS holds more than 10% as a major shareholder has decreased from nine to five this year. This trend is similar across other sectors as well. The number of listed companies where the NPS is a major shareholder decreased from 43 at the end of last year to 32 as of the 20th. Compared to 87 at the end of 2020, this is less than half. The trend of reducing domestic equity holdings continues, which is interpreted as a result of stronger diversification tendencies than in the past. The proportion of domestic stocks in the NPS’s investment assets has steadily declined from 21.2% in 2020 to 14.3% last year.
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