Pension Funds Sell $159 Million of Kosdaq Stocks in April, Wiping Out Most of Q1 Buying in 10 Days

South Korea’s pension funds, among the biggest players in the domestic stock market, have turned into heavy sellers on the Kosdaq this month. They dumped most of what they bought in the first quarter in just 10 days, underscoring a broader rush for the exits from the junior bourse. The move comes even as the government has encouraged institutional investors to step up Kosdaq investment to revive the market.

Pension funds were net sellers of 233.4 billion won ($159 million) of Kosdaq shares this month through April 10, according to the Korea Exchange. That compares with net purchases of 271.1 billion won ($184 million) from January through March. In effect, they had already given back almost all of this year’s net buying before April was half over.

The selling was concentrated in biotech stocks. Pension funds sold the most shares in Voronoi, offloading about 43.4 billion won ($29.5 million) worth over 10 days. Other heavy sales included LigaChem Biosciences at 23 billion won ($15.7 million), Sam Chun Dang Pharm at 22 billion won ($15 million) and Olix at 20.6 billion won ($14 million). Investor sentiment toward biotech weakened after LigaChem Biosciences’ technology export contract was canceled and Sam Chun Dang Pharm was hit by controversy. Pension funds also sold 27.7 billion won ($18.8 million) of ISC, a maker of semiconductor back-end components. That was largely tied to the National Pension Service cutting its stake to 4.10% from 6.16% on April 1.

Pension funds manage domestic equities against target allocations in their portfolios. They typically lock in gains when stocks surge and buy on weakness. But they chose to sell even as the Kosdaq index fell 1.98% from April 1. That runs counter to the government’s policy push to encourage institutional investment in the Kosdaq.

Market volatility appears to have accelerated the selling. External managers entrusted with pension-fund assets likely cut Kosdaq exposure to protect returns. “Outsourced managers move strictly based on performance, so they were highly likely to sell Kosdaq stocks to defend returns in a volatile market,” Lee Geon-jae, head of Kosdaq research at IBK Securities, said. It is unlikely to reflect the pension funds’ own investment intent, he added.

Pension funds still selectively bought stocks with new growth drivers. Their biggest net purchase this month was Simmtech, a maker of printed circuit boards for semiconductors, at 26.4 billion won ($18 million). Money also flowed into Robotoiz, which specializes in autonomous-driving robots, at 13.4 billion won ($9.1 million), and JS Link, which is pursuing a rare-earth business, at 12.6 billion won ($8.6 million). Taekwang, which is expanding beyond its traditional textile and financial businesses into batteries and biotech, was also on the net-buy list at 12.3 billion won ($8.4 million).

Oh Hyun-ah, Hankyung.com reporter 5hyun@hankyung.com