Korea Pension Poised to Raise Shareholdings
Relaxing South Korean disclosure requirements will probably spur the nation’s biggest pension fund to increase shareholdings in some local companies, the head of the fund’s investment strategy division said.
The National Pension Service may boost stakes in some stocks above the 10 percent threshold that requires government institutions to report positions, Yoon Young Mok, the head of the NPS’s strategy unit in Seoul, said by phone on July 29. The new rule, scheduled to take effect on Aug. 29, lengthens the timing of disclosures to once a quarter from within five days of the last transaction, according to a draft of the law posted on the Ministry of Government Legislation’s website.
The existing disclosure requirements had made it difficult for the fund to make some “strategic” changes to its holdings, Yoon told reporters last month. The fund, which holds about 6 percent of publicly traded shares in South Korea, is the biggest investor in the nation’s $1.1 trillion stock market, Yoon said. It owns at least 6.1 percent of SK Telecom Co. (017670), Mando Corp. (060980) and Hyundai Motor Co. (005380), according to an April 9 regulatory filing.
“There are certain companies that we need to acquire more than 10 percent,” Yoon said in the phone interview, declining to name specific stocks. The NPS had 408 trillion won ($366 billion) in assets as of April.
The revised bill, which is being reviewed by the Ministry of Government Legislation, will need to be passed at meetings of the nation’s vice ministers and Cabinet before taking effect next month, according to a statement by the Financial Services Commission released June 13.
The new rule is a “backward step” to international investors in terms of market transparency, said Julian Mayo, the London-based co-chief investment officer at Charlemagne Capital Ltd. (CCAP), which oversees $2.7 billion.
“Five days sounds reasonable, while every quarter does not,” Mayo wrote in a July 29 e-mail. “Someone could buy 10 percent of a company on July 1, and then add to it, and not disclose until Sept. 30.”
Non-state institutions in South Korea will still have to abide by the existing rules. In Hong Kong, investors holding at least 5 percent of a publicly traded company have three business days to disclose ownership changes and 10 days for special situations such as initial public offerings in which they have a 5 percent stake, according to the website of the city’s Securities and Futures Commission.
The NPS will raise the weighting of overseas stocks to 10.5 percent of assets in 2014 from 9.3 percent targeted for this year, the Ministry of Health and Welfare, which oversees the NPS, said in a June 14 statement. The representation for domestic equities will be left unchanged at 20 percent.
The new disclosure rule will probably push the NPS to buy more shares of small and mid-sized companies, which will boost investor confidence, according to Heo Pil Seok, chief executive officer at Midas International Asset Management Ltd., which oversees about $6.4 billion.
“There have been times when other investors hesitated in purchasing certain domestic equities just because the pension fund was unlikely to invest more in them,” he said by phone on July 29.
The Kospi (KOSPI) gained 0.9 percent today in Seoul. The gauge has fallen 4 percent this year as a stronger won curbed the competitiveness of the nation’s exporters and as concern mounted the U.S. Federal Reserve would wind back stimulus. The South Korean gauge trades for 9 times 12-month projected profit, less than the MSCI Emerging Markets Index’s multiple of 10, data compiled by Bloomberg show.
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