Institutions Lead May's Bull Market... Pension Funds Also Continue Net Buying Streak

Institutions Net Buy 576.9 Billion KRW This Month
KOSPI Rises for 3 Consecutive Trading Days
Expectations for Leading Additional Gains

Pension Funds Also Bought 55.4 Billion KRW Last Week
Focus on Earnings Improvement Stocks and Cyclical Stocks
Concentrated Buying of SK바사 and S-Oil

[Asia Economy Reporters Song Hwajeong, Park Jihwan] Attention is focused on whether institutions, which have maintained a selling trend for some time, will play a leading role in driving further gains in the KOSPI as they have recently started net buying.

According to the Korea Exchange on the 10th, institutions have net bought 576.9 billion KRW in the KOSPI this month. In particular, they have driven the KOSPI's rise by net buying for three consecutive days recently. This is the first time since early February that institutions have recorded net buying for three straight days. Thanks to institutional net buying, the KOSPI, which had fallen to the 3,120 level, rose for three consecutive days and approached the 3,200 level.

With institutions leading the index's rise by net buying for the first time in a while, expectations are growing for a shift to buying by institutions. Since the beginning of this year until the 7th, institutions have sold off 33.5951 trillion KRW in the KOSPI. This figure far exceeds last year's total net selling volume of 25.5372 trillion KRW by institutions. Looking at last year by month, institutions showed net buying only in March with 116.6 billion KRW, while all other months were net selling. This trend has continued into this year. Even as individuals have continuously bought and foreigners have bought, causing the KOSPI to show strong upward momentum and reach record highs, institutions have maintained a selling trend and played no role in pushing the index to new highs. However, this time, institutions have taken a leading role in lifting the index by net buying for three consecutive days, raising hopes that they may turn to buying and lead further KOSPI gains.

In particular, the fact that pension funds, which have been selling since last year, have shown net buying this month also increases the possibility of a KOSPI rise. Pension funds recorded net buying of 55.4 billion KRW in the KOSPI last week. On a weekly basis, this is the first time in seven months since the first week of October last year, when they net bought 40.2 billion KRW. If this trend continues until the end of the month, it will mark the first monthly net buying flow in a year since May last year.

Pension funds’ net buying has been concentrated on stocks with improved earnings and cyclical stocks sensitive to the economy. The stock most bought by pension funds in the KOSPI last week was SK Bioscience (32.5 billion KRW). Following were S-Oil (31.1 billion KRW), Korean Air (24.7 billion KRW), HMM (23.7 billion KRW), LG Display (22.2 billion KRW), SK Innovation (20.6 billion KRW), Korea Zinc (18.0 billion KRW), Hyundai Motor (16.1 billion KRW), Hyundai Steel (13.3 billion KRW), and LG Household & Health Care (13.0 billion KRW), which were among the top purchased stocks.

In the case of SK Bioscience, sales in the first quarter of this year reached 112.7 billion KRW, a 422% increase compared to the same period last year. Operating profit turned positive at 53.7 billion KRW. A record-breaking annual performance is also anticipated. The contract manufacturing organization (CMO) volume for the AstraZeneca vaccine, which drove first-quarter results, is likely to be extended until next year, and commercial production of the Novavax vaccine, starting in the second half of the year, will add to the performance. Kiwoom Securities researcher Heo Hyemin said, "COVID-19 vaccine distribution and CMO led the earnings growth in the first quarter," adding, "Sales this year are expected to exceed about 800 billion KRW."

Stocks related to raw materials and transportation, such as S-Oil, Korean Air, HMM, and Korea Zinc, are expected to see rapid earnings improvement due to quickly increasing demand from economic recovery, while supply increases remain limited.

The returns of stocks net bought by pension funds are also favorable. The average weekly return of the top 10 stocks net bought by pension funds reached 4.99%. During this period, the KOSPI rose only 1.57%.

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