NPS’ stock concentration in Samsung, top conglomerates deepens in H1, 2016

Jul 21, 2016 (Gmt+09:00)

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The units of the Samsung Group made up a quarter of the National Pension Service’s (NPS) Korean stock holdings in value in the first half of this year, lifting the ratio of the Samsung units in the pension fund's domestic stock portfolios to the highest level in more than three years, according to a local research website on July 20.

image_readtop_2016_202248_14581908842398522

image_readtop_2016_202248_14581908842398522

Overall, the proportion of the country’s top 30 conglomerates, including Samsung, LG and Hyundai, climbed 4% points to 64.5% of the NPS’ domestic shareholding value of 100 trillion won ($88 billion) at the end of June from the end of 2015, CEOSCORE said in a report. It analyzed the NPS’ investments in the 179 listed companies of South Korea’s top 30 business groups as of July 15.

The increase in the Samsung units' weighting in the pension scheme's stock investments compared with the flat KOSPI index during the same period and was attributed in large part to the stock price gains of the business groups’ units. Samsung Electronics Co. Ltd. alone represented 20.6% of the NPS’ total Korean stock portfolios, up 3.2% points from a half year ago.

“More than half of the share valuation gains of the top 30 business groups in which the NPS invested, or 56% of 4.8 trillion won, came from the Samsung Group in the first half of this year,” the research website said in the report. “And the NPS’ concentration in Samsung has further deepened.”

The shareholding ratio in Samsung Electronics is broadly in line with the technology giant’s weighting of 18% in the KOSPI stock market capitalization at the end of June. Shares in the world’s largest smartphone maker had risen 13% in the first six months of this year, outperforming the flat KOSPI index that the NPS’ domestic stock portfolios benchmark.

The percentage of the Samsung Group units in the world’s No.3 pension scheme’s domestic stock portfolios rose to 25.1% in the first half of this year, up from 22.7% in 2015. The latest reading was the highest number in three and a half years.

According to the NPS’ investment policy statement, it is pursuing passive strategies for both local and global equities, keeping track of the KOSPI index for domestic stocks and the MSCI World Index for global portfolios, respectively. It also demands its contract stock management companies to further increase the ratio of shares mirroring those benchmark indices.

NPS holds more than 5% stake in nine out of Samsung’s 15 listed companies. There had been no change in its 9.14% stake in Samsung Electronics in the first half of this year: share cancellation and stock price gains boosted the value of the NPS’ shares in the firm.

For other Samsung units, including Hotel Shilla Co. Ltd. and Cheil Worldwide Inc., their share valuation gains rose by 12.5% to 24.2 trillion won in aggregate for the NPS. It is not known immediately whether the NPS changed its stake in the other Samsung G
roup companies in the first six months of this year.

By comparison, NPS’ shareholding values in the units of the Hyundai Motor Group and the LG Group dropped in the first half of 2016, while those of the SK Group increased, according to the report.

Following disappointing returns on domestic stock portfolios in the past few years, NPS has decided to slash the net increase amount in domestic equities investments by 95% to 200 billion won in 2017. Caution about the pension fund’s heavy presence in Korean stock markets, in tandem with its snowballing asset size, also has been behind the NPS’ diversification into overseas markets and alternative investments.

By company, Hyundai Home Shopping Network Corp. saw the biggest increase in the NPS’ shareholding in the January to June period. NPS pushed up its stake in the shopping channel by almost 5% points to 11.07%.

But Hyundai Wia Corp. suffered the biggest fall in the NPS’ share ownership. NPS reduced its stake in the automotive parts maker by 3.86% points to 8.14%.