While Individuals Take a Breather, Institutions as 'Main Net Buyers' Bet on a Bull Market "Focus on Large-Cap Stocks"

Institutions Focus on Net Buying from Late May to Support Index
KODEX Leverage Following Index Rise with Net Buying
Mutual Funds Also Switch to Net Buying Seeking Absolute Returns

[Asia Economy Reporter Lee Seon-ae] A change is detected in the net trading flow of institutions. Since the end of last month, they have been supporting the index with net buying and leading the rising market.

According to the Korea Exchange on the 2nd, the main player in the rising market on the first trading day of June was institutions. On the 1st, institutions supported the index by net buying 550.3 billion KRW in the KOSPI market. On the other hand, individuals net sold 524.3 billion KRW. This trend has appeared since the end of May. Institutions recorded net buying dominance for six consecutive trading days from May 21 to 28 in the KOSPI market, net buying a total of about 2.2658 trillion KRW. During the same period, individuals net sold 1.9019 trillion KRW. Since the beginning of the year, whenever the index showed adjustments, individuals absorbed all the selling volume from institutions to defend against index declines, but since the end of May, the opposite position has appeared.

It is interpreted that institutions have bet on the rising domestic stock market. The stocks they actually purchased also prove this. Among the top net bought stocks by institutions from May 24 to June 1, KODEX Leverage (189.9 billion KRW) ranked second. KODEX Leverage, which bets on a rising market, tracks twice the index increase. The most purchased stock was Samsung Electronics (228.4 billion KRW). The domestic KOSPI index can rise flexibly only when the stock price of Samsung Electronics, the largest market capitalization stock, rises. In addition, the fact that they focused on large-cap stocks such as Korea Electric Power Corporation (185.4 billion KRW), Kia (161.7 billion KRW), Kakao (132.9 billion KRW), SK Hynix (119.1 billion KRW), Hyundai Motor (112.5 billion KRW), NAVER (86.9 billion KRW), Celltrion (84.7 billion KRW), and KT&G (75.7 billion KRW) is also interpreted as anticipating the upward curve of the KOSPI.

The net buying turnaround by asset management companies (investment trusts) is also noteworthy. Over the past month, investment trusts net bought 192.3 billion KRW. This is the first monthly net buying turnaround in 22 months since August 2019. The net buying turnaround of investment trusts, which pursue absolute returns, means that the environment for a rising domestic index has been created. The stock most purchased by them in May was Hyundai Motor (112.5 billion KRW). Kia (74.8 billion KRW) ranked second, Hyundai Wia (32.5 billion KRW) fifth, and Mando (29.4 billion KRW) sixth. All of these are automobile-related stocks. CJ CheilJedang (46.6 billion KRW), ranked third, is the top food company in Korea and is considered a representative defensive stock.

Public pension funds also turned to net buying last month, one year after recording continuous net selling since June 2020. Last month, public pension funds net bought 16.5 billion KRW, purchasing the most of Samsung Biologics (177.7 billion KRW), Hyundai Motor (123.8 billion KRW), Korean Air (121.9 billion KRW), CJ CheilJedang (95.6 billion KRW), Hotel Shilla (89.6 billion KRW), and Kia (82.3 billion KRW). On the first trading day of June, public pension funds also recorded net buying dominance.

The market expects the selling spree by public pension funds to slow down in summer. KB Securities researcher Lee Eun-taek said, "Public pension funds, which played the role of savior for the Korean stock market during the sharp decline in the first half of 2020, currently hold a higher level than their domestic stock target ratio, so additional selling pressure exists. However, mechanical net selling is expected to end in summer, and although it will be difficult to expect full-scale net buying from the second half, the disappearance of the selling pressure that used to be several trillion KRW per month will lead to easing the supply-demand burden on the domestic stock market in the second half."

Hana Financial Investment researcher Lee Jae-sun also said, "Last year, the domestic stock market's sharp rise forced the National Pension Service, which has a limit on holding ratios, to realize profits, but since they have significantly reduced their holdings, even if they sell, the intensity will be lower than at the beginning of the year."

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