Largest Selling Force 'Institutions' Sold 24 Trillion Won, Still Selling... "Take What You Need"

Post-Seol Institutional Selling Pressure, Supply-Demand Instability Intensifies
Retirement Funds Sell-Off Rally... Plan to Sell Additional 30 Trillion Won
Institutions Accumulate Electric Vehicle and Hydrogen-Related Stocks

On the 10th, employees are working at Hana Bank in Myeongdong, Seoul. On this day, the KOSPI closed at 3100.58, up 15.91 points (0.52%) from the previous trading day. [Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] As institutional investors continue their selling spree since the beginning of the new year, emerging as the largest selling force in the domestic stock market this year, it is expected that net selling will persist even after the Lunar New Year holiday, raising warning signals for the supply and demand in the domestic stock market.

Institutions’ Net Selling Around 24 Trillion Won

According to the Korea Exchange on the 13th, institutions have continued their selling streak since the start of the year. From the first trading day on January 4th to the day before the Lunar New Year holiday on February 10th, institutions’ net selling amounted to 24.6004 trillion won. During the same period, foreigners also net sold 4.7772 trillion won, while individuals alone net bought 29.9048 trillion won, helping to cushion the stock price decline. All institutional investor types have participated in net selling. Financial investment, insurance, investment trusts, private equity, other financial institutions, and pension funds have all been selling. In particular, pension funds have sold the largest volume, amounting to 10.8563 trillion won.

Pension funds have maintained the longest selling rally. According to the investor classification by the Korea Exchange, pension funds include pensions, funds, mutual aid associations, as well as national and local governments. This includes the National Pension Service, Government Employees Pension, Private School Teachers Pension, Teachers’ Mutual Aid Association, Military Mutual Aid Association, Administrative Mutual Aid Association, and Korea Post. The record-high net selling by pension funds is analyzed as part of asset allocation adjustments following stock price increases. Pension funds adjust their asset proportions according to pre-established fund management plans. For example, the National Pension Service’s domestic stock target ratio was 17.3% until the end of last year and was lowered by 0.5 percentage points to 16.8% this year. As of the end of November last year, the National Pension Service’s domestic stock ratio was 19.6%, exceeding the target by 2.3 percentage points.

Pension fund selling has focused on leading stocks with large gains, such as ChaHwaJeon (automobiles, chemicals (batteries), electronics (semiconductors)). From January 4th to February 10th, pension funds sold Samsung Electronics the most (3.363 trillion won), followed by Hyundai Motor (606 billion won), LG Chem (590 billion won), and SK Hynix (536 billion won).

Pension Funds to Sell Additional 30 Trillion Won

Market experts expect the large-scale selling by institutions to continue even after the Lunar New Year holiday next week. Since each institution has different management strategies and some, like investment trusts or private equity funds, face redemption pressures forcing them to sell stocks, the selling trend among institutions is not expected to end soon. In particular, the general consensus in the securities industry is that pension funds will sell about 30 trillion won more.

Labor Gil, a researcher at NH Investment & Securities, analyzed, "Considering the index rise effect, the pension funds’ domestic stock target ratio is estimated to have risen significantly to 22.5%. If the current KOSPI level is maintained, the additional net selling by pension funds on the KOSPI until the end of the year is judged to be in the 30 trillion won range." He added, "Considering the average daily net selling speed of pension funds on the KOSPI this year, the target ratio can be achieved by early June. Since the asset allocation target achievement time is the end of the year and considering the possibility of increased volatility in the KOSPI within the year, the net selling speed of pension funds is expected to slow down before June."

Ultimately, the supply and demand of individuals and foreigners, who were the main players in the strong market in January, are crucial for the domestic stock market.

Lee Jae-seon, a researcher at Hana Financial Investment, said, "For a sustained upward trend in the index, it is important whether the strong buying power of individuals, who were the main players in the strong market in January, is maintained or whether foreign investors’ supply and demand, which has determined the index direction so far, improves. If individual buying power weakens somewhat, the main factor determining the index level will inevitably be foreign investors’ influence, but currently, foreign investors’ supply and demand have been neutral since the beginning of the year," he evaluated.

Kim Dae-jun, a researcher at Korea Investment & Securities, emphasized, "Since individuals continue to absorb the volume poured out by institutions, a significant decline in the index itself is not expected. However, as in the past, the market direction will be determined by foreigners, so it is necessary to carefully monitor foreign investors’ trading trends."

In the Shopping Basket: Electric Vehicle and Hydrogen-Related Stocks

Even institutions, the largest selling force in the domestic stock market this year, have been steadily accumulating electric vehicle and hydrogen economy-related stocks, drawing attention.

The stocks most purchased by institutions since the beginning of the year until the 10th are SK (128 billion won), followed by S-Oil (110 billion won), POSCO Chemical (94 billion won), EcoPro (89 billion won), Korea Zinc (87 billion won), Big Hit (79 billion won), and LG Innotek (76 billion won).

SK is considered a leading domestic hydrogen fuel cell-related stock. SK established a joint venture (JV), BloomSK Fuel Cell, with Bloom Energy, the world’s largest hydrogen fuel cell company based in the United States. Doosan Fuel Cell is recognized as one of the few companies worldwide possessing core fuel cell technology.

EcoPro is the largest shareholder of EcoPro BM, a leading domestic secondary battery-related company. Jung Yong-taek, head of the IBK Investment & Securities Research Center, analyzed, "Although eco-friendly stocks currently face valuation (price-to-earnings) burdens, they are likely to improve in the long term. Even if a correction phase comes, these stocks are expected to endure and trend upward, which is why institutions are holding them."

This content was produced with the assistance of AI translation services.