By Nam Hyun-woo
The National Pension Service (NPS) is in the hot seat on Monday for its Hanmi Pharmaceutical stocks transactions.
The NPS, which runs approximately 500 trillion won of the money of some 21 million subscribers, is facing strong criticism over its transactions on Hanmi stock, which caused a stir on the domestic stock market with a belated posting on Sept. 30.
According to Rep. Kim Myung-yeon of the Saenuri Party, six funds containing Hanmi shares sold a significant amount of stock from 9 a.m. to 9:13 a.m. on Sept. 30. The six funds were run by four asset management companies, whose identities have been withheld.
The drug maker announced the termination of a cancer drug license deal between Hanmi and Boehringer Ingelheim at 9:28 a.m. During the 30 minutes from market opening, a massive volume of Hanmi stocks was sold through short-selling.
Short selling refers to a trading strategy in which an investor sells borrowed shares in anticipation of a price decline. After the decline, the investor can buy the shares at a lower price and gain from the margin.
Since half of the total volume of Hanmi short-selling on Sept. 30 was concentrated between 9 a.m. to 9:28 a.m., financial authorities are investigating the company and traders with a suspicion that non-public information has been leaked through Kakao Talk mobile messenger.
If those companies are found to be involved in insider trading, the NPS, which has some 100 Hanmi related funds run by commissioned asset management companies, will also be heavily criticized for misusing subscribers' money.
According to the Financial Supervisory Service's public announcement system, the NPS sold 1.6 percent out of its 8.7 percent of Hanmi shares on Sept. 30. The amount NPS sold on the day stood at some 87 billion won.
Of the allegations, an NPS official said that the NPS both directly order commissioned firms to trade certain company's stock or give full discretion to the asset management companies. "However, the moves were made by some entrusted firms," the official said.
The official added that the NPS will review its contracts with those firms, but it will first pay attention to the results of the financial authorities' investigation.
The NPS is also facing criticism that it has been enjoying sound gains by lending stocks to short-sellers.
According to NPS data submitted to Rep. Kwon Mi-hyuk of the Minjoo Party of Korea, the NPS has gained 6.5 billion won in commissions for lending its drug making and bio stocks worth 62.9 billion won since January 2013 to June 2016. Of them, the amount, Hanmi stock was the second largest with 9.1 billion won.
Short selling is a legitimate stock trading strategy, but it has been a target of criticism because it mostly benefits institutional investors, such as asset management companies, securities firms and foreign hedge funds which are better informed and capable of taking advantage of market changes.
With the criticisms, there are political drives prohibiting the NPS from lending its stock, because it encourages short-selling, which oftentimes cause losses for minor individual investors. Rep. Kwon tabled such a bill in August, but she is yet to see any progress in the bill.
Another criticism that the NPS faces is the amount of losses it suffered from Hanmi's belated posting.
Hanmi's stock price has plunged from 620,000 won on Sept. 29 to 457,000 won on Oct. 5, showing a 26 percent nosedive after three sessions. Based on this, Rep. Kim Kwang-soo of People's Party said the losses of the NPS from the Hanmi debacle amounts to 150 billion won.
"If the NPS suffered the loss because of Hanmi's suspected unfair trading, the NPS should claim compensation from the drug maker," said Kim.
The National Pension Service (NPS) is in the hot seat on Monday for its Hanmi Pharmaceutical stocks transactions.
The NPS, which runs approximately 500 trillion won of the money of some 21 million subscribers, is facing strong criticism over its transactions on Hanmi stock, which caused a stir on the domestic stock market with a belated posting on Sept. 30.
According to Rep. Kim Myung-yeon of the Saenuri Party, six funds containing Hanmi shares sold a significant amount of stock from 9 a.m. to 9:13 a.m. on Sept. 30. The six funds were run by four asset management companies, whose identities have been withheld.
The drug maker announced the termination of a cancer drug license deal between Hanmi and Boehringer Ingelheim at 9:28 a.m. During the 30 minutes from market opening, a massive volume of Hanmi stocks was sold through short-selling.
Short selling refers to a trading strategy in which an investor sells borrowed shares in anticipation of a price decline. After the decline, the investor can buy the shares at a lower price and gain from the margin.
Since half of the total volume of Hanmi short-selling on Sept. 30 was concentrated between 9 a.m. to 9:28 a.m., financial authorities are investigating the company and traders with a suspicion that non-public information has been leaked through Kakao Talk mobile messenger.
If those companies are found to be involved in insider trading, the NPS, which has some 100 Hanmi related funds run by commissioned asset management companies, will also be heavily criticized for misusing subscribers' money.
According to the Financial Supervisory Service's public announcement system, the NPS sold 1.6 percent out of its 8.7 percent of Hanmi shares on Sept. 30. The amount NPS sold on the day stood at some 87 billion won.
Of the allegations, an NPS official said that the NPS both directly order commissioned firms to trade certain company's stock or give full discretion to the asset management companies. "However, the moves were made by some entrusted firms," the official said.
The official added that the NPS will review its contracts with those firms, but it will first pay attention to the results of the financial authorities' investigation.
The NPS is also facing criticism that it has been enjoying sound gains by lending stocks to short-sellers.
According to NPS data submitted to Rep. Kwon Mi-hyuk of the Minjoo Party of Korea, the NPS has gained 6.5 billion won in commissions for lending its drug making and bio stocks worth 62.9 billion won since January 2013 to June 2016. Of them, the amount, Hanmi stock was the second largest with 9.1 billion won.
Short selling is a legitimate stock trading strategy, but it has been a target of criticism because it mostly benefits institutional investors, such as asset management companies, securities firms and foreign hedge funds which are better informed and capable of taking advantage of market changes.
With the criticisms, there are political drives prohibiting the NPS from lending its stock, because it encourages short-selling, which oftentimes cause losses for minor individual investors. Rep. Kwon tabled such a bill in August, but she is yet to see any progress in the bill.
Another criticism that the NPS faces is the amount of losses it suffered from Hanmi's belated posting.
Hanmi's stock price has plunged from 620,000 won on Sept. 29 to 457,000 won on Oct. 5, showing a 26 percent nosedive after three sessions. Based on this, Rep. Kim Kwang-soo of People's Party said the losses of the NPS from the Hanmi debacle amounts to 150 billion won.
"If the NPS suffered the loss because of Hanmi's suspected unfair trading, the NPS should claim compensation from the drug maker," said Kim.
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