By Kang Seung-woo
With local shares plunging day by day in jitters over the U.S. double-dip recession and Europe’s debt crisis, pension funds are setting out to purchase shares in an effort to stabilize the stock market.
The benchmark Korea Composite Stock Price Index (KOSPI) shed approximately 100 points in early-morning trading from the previous session's close. The pension funds, which have often eased concerns in the market amid internal and external uncertainties, started flexing their muscles Friday by buying some 50 million worth of shares to stem a selloff.
They focused on large-cap stocks of POSCO, Samsung Electronics, Kia Motors and KT that saw their shares tumble, fueled by massive selling by foreign investors.
On Friday, the KOSPI ended down 3.7 percent, or 74.72 points, to 1,943.75, the lowest close since March 15, with selling trumping buying 805 to 66.
Observers credited pension funds’ intervention for the benchmark index’s afternoon rally.
While the KOSPI lost 229 points from Tuesday to Friday, with foreigners selling shares worth 2 trillion won at the Seoul bureau, pension funds purchased 953.1 billion won worth of shares in the cited period _ 184.9 billion won on Tuesday, 247.6 billion won on Wednesday, 35.4 billion won on Thursday and 485.2 billion won on Friday.
The trust fund industry expects that they can maintain the buying trend for the time being because export-driven shares including auto stocks are trading at low prices and the funds have the capital to purchase shares.
“The National Pension Service (NPS) has decided to raise its investment in domestic shares 18 percent for this year and 19.3 percent for next year,” said a Seoul-based economist.
“Due to external unexpected variables, the local shares recorded sharp declines, which resulted in Hyundai Motor’s price earnings ratio (PER) dropping by eight times.”
Another analyst says that it is the right time for pension funds to open their wallets.
“The stock prices have taken a nosedive and it is creating a friendly environment for them to pump money into buying shares,” he said.
He added, “The funds spent more than 480 billion won on Friday and it cannot be seen as efforts to just stem a selloff because they are one of the most conservative entities in terms of investment. Given the trend, their purchase of shares may provide a glimpse of the KOSPI nearing the bottom end.”