National Pension Service Increased Domestic Stocks in Q1... Also Moves to Respond to US Tariffs

The 'major player' National Pension Service (NPS) significantly increased its holdings of large-cap stocks in the domestic equity market in the first quarter of this year, strengthening its buying momentum. In particular, investment proportions increased in sectors expected to benefit from China's economic stimulus measures, such as petrochemicals, travel, cosmetics, and banking & securities. Conversely, investments were reduced in sectors expected to be adversely affected by U.S. tariffs, such as apparel, and some profit-taking was observed in stocks that saw significant price gains last year.

According to the National Pension Service and the Financial Supervisory Service's electronic disclosure system on the 11th, as of the first quarter of this year, the NPS held a stake of 5% or more in a total of 116 stocks. This represents a 33% increase (29 stocks) compared to the fourth quarter of last year (87 stocks). Among these, 73 stocks saw an increase in shareholding ratio, 41 stocks saw a decrease, and 2 stocks remained unchanged. The NPS discloses when its shareholding exceeds 5% or when the shareholding ratio in stocks held at 5% or more changes by more than 1%.

Petrochemicals and Cosmetics Expected to Benefit from China

The stock with the largest increase in shareholding ratio was Isu Petasys. From January to March, through five rounds of stock purchases and allocation of new share subscription rights ahead of a paid-in capital increase, the holding ratio rose from 7.43% to 13.47%, an increase of 6.04 percentage points. Hansol Chemical followed with a 2.34 percentage point increase (from 9.81% to 12.15%), then Emart (2.24 percentage points), Hyundai Steel (2.22 percentage points), Hyundai Construction (2.2 percentage points), and Hanwha Vision & MRO (2.16 percentage points).

In particular, the NPS noticeably increased its investment in petrochemical stocks in the first quarter. Among the domestic petrochemical Big 4 (LG Chem, Lotte Chemical, Kumho Petrochemical, Hanwha Solutions), the holding ratios of Kumho Petrochemical (up 2.08 percentage points), Lotte Chemical (up 1.11 percentage points), and LG Chem (up 1.04 percentage points) increased, and the NPS also raised its shareholding by more than 1 percentage point in Daehan Petrochemical (1.03 percentage points) and SK Innovation (1.02 percentage points). The domestic petrochemical industry is expected to grow in performance due to China's government policy of 'Igu Hwanxin' (replacing old products with new ones) aimed at stimulating domestic demand.

Investment proportions in travel and cosmetics sectors also increased. This includes Korea Kolmar (up 2.1 percentage points), Shinsegae (1.08 percentage points), Amorepacific (1.02 percentage points), and Hana Tour (1.02 percentage points). This is analyzed as reflecting expectations for the lifting of China's ban on Korean Wave (Hallyu) content.

Banking and securities stocks were also added consecutively. Korea Investment Holdings increased the most by 2.07 percentage points, followed by BNK Financial Group (1.02 percentage points), DGB Financial Group and Mirae Asset Securities (1.01 percentage points), and Kakao Bank (1 percentage point), all increasing by around 1 percentage point.

An industry insider explained, "There appears to be an increase in the proportion of value stocks such as materials and industrials in response to the expansion of traditional industry investments in the U.S. and Europe, and consumer stocks are also viewed positively."

Reduction in Apparel OEM, Profit-Taking in Hanwha Engine, etc.

On the other hand, the NPS significantly reduced its shareholding ratios in the first quarter in stocks such as Samhwa Electric and Myungshin Industry (-2.31 percentage points), Nexen Tire (-2.04 percentage points), GSP&L and Orion Holdings (-2.02 percentage points), Olix (-1.32 percentage points), and HanAll Biopharma (-1.16 percentage points).

Looking at the stocks with decreased shareholding ratios, the NPS appears to be proactively responding to the imposition of reciprocal tariffs by the U.S. A representative example is the reduction of shareholdings in domestic apparel original equipment manufacturing (OEM) companies. These include Youngone Holdings (-1.02 percentage points), Hansae Co. (-1.00 percentage point), and Hwasung Enterprise (-0.05 percentage points). Hyung Kwon-hoon, a researcher at SK Securities, analyzed these companies, stating, "Although the tariff rates on apparel products from Southeast Asia, the main production region, are significantly lower than those of the U.S., limiting the direct impact of tariffs, there is concern that reciprocal tariffs may dampen consumer sentiment in the U.S."

For stocks that saw significant price increases last year, some profit-taking was carried out. For example, the NPS reduced its shareholding ratio in Hanwha Engine by 1.03 percentage points in the first quarter; the stock price surged from the 9,000 won range in April last year to 28,750 won in February this year. STX Engine also rose sharply from the 12,000 won range to the 31,000 won range during the same period.