South Korea's National Pension Service (NPS) resumed portfolio rebalancing in July, selling Samsung Electronics and buying SK Hynix as the top net sell and net buy stocks respectively during the month's opening days. From July 1 to 6, the pension fund net sold 201.6 billion won worth of Samsung Electronics shares while net purchasing 108.1 billion won of SK Hynix stock. The rebalancing activity comes as SK Hynix prepares for its American Depositary Receipt (ADR) listing on Nasdaq on July 10, and Samsung Electronics is set to announce its second-quarter preliminary earnings on July 7. Analysts attribute the NPS's SK Hynix purchases to expectations of expanded HBM demand and a broader global investor base following the ADR listing. The market is focused on whether the pension fund's rebalancing will trigger significant selling pressure, though securities firms assess the impact will likely remain limited given NPS's reduced rebalancing limits and controlled execution pace.
NPS Net Sold Samsung Electronics 201.6B Won, Net Bought SK Hynix 108.1B Won in Early July
According to Korea Exchange data, the pension fund net sold Samsung Electronics for 201.6 billion won during the period, making it the most heavily sold stock. Other top net sells included SK Square (196.7 billion won), Samsung Electro-Mechanics (124.5 billion won), Samsung C&T (65.2 billion won), and Samsung Electronics preferred shares (36.4 billion won).
On the buying side, SK Hynix led with 108.1 billion won in net purchases. Following SK Hynix were Hanwha Aerospace (56.7 billion won), Shinhan Financial Group (52.4 billion won), Celltrion (38.4 billion won), and Amorepacific (38.3 billion won).
The simultaneous positioning of Samsung Electronics and SK Hynix as the top net sell and net buy stocks respectively has drawn market attention. Both companies face near-term catalysts that could influence semiconductor large-cap investment sentiment.
SK Hynix ADR Lists on Nasdaq July 10 with 1:0.1 Share Ratio
SK Hynix's ADR is scheduled to list on the U.S. Nasdaq exchange on July 10. The ADR structure links one ADR share to 0.1 ordinary shares traded in South Korea, meaning 10 ADR shares correspond to one domestic ordinary share.
The ADR pricing relative to the domestic ordinary share price will serve as an indicator of U.S. investor demand. If the ADR trades at a premium when converted to ordinary share equivalent pricing, it signals stronger U.S. investor appetite compared to the domestic market. Conversely, a discount would suggest either pre-listing expectations were already reflected in domestic prices or weaker U.S. market demand.
For example, using SK Hynix's domestic closing price of 2.425 million won on July 3 and an exchange rate of 1,530 won per dollar, the estimated ADR price would be approximately $158.5 per share. Trading above this level would indicate U.S. investors value SK Hynix higher than the domestic market.
Park Jun-young, a researcher at Hanwha Investment & Securities, stated: "ADR listing is an opportunity to be evaluated within the same market as peer groups in the U.S. stock market. Considering the overwhelming valuation attractiveness, scale of profits, and technological superiority, this could be an opportunity for the company to be re-evaluated."
Potential inclusion in U.S. exchange-traded funds (ETFs) and major indices represents an additional demand variable. Based on SK Hynix ADR's maximum possible listing size, the securities industry forecasts approximately $340 million in demand from semiconductor index ETFs and around $450 million from Nasdaq index-tracking ETFs.
Samsung Electronics Announces Q2 Preliminary Results July 7
Samsung Electronics, which NPS heavily net sold, is scheduled to announce its second-quarter preliminary earnings on July 7. The industry expects Samsung Electronics' profit capacity improved due to rising memory prices, though the magnitude of special management performance bonuses or semiconductor division bonus provisions reflected in the DS division could determine the final operating profit figure.
Analysts Predict Limited Market Impact from NPS Rebalancing
Securities firms anticipate the market impact from resumed NPS rebalancing will remain limited. Since the pension fund reduced rebalancing limits and can adjust execution speed, the likelihood of selling volume flooding the market at once is low.
Cho Yong-gu, a researcher at Shinyoung Securities, said: "To minimize market impact, annual, monthly, and daily rebalancing caps were reduced, and the actual rebalancing execution scale and speed are both undisclosed. The longer the stock price uptrend continues, the slower the selling pace will be, and consideration will also be given to further increasing the domestic stock allocation by year-end."
FAQ
Q: What stocks did South Korea's National Pension Service buy and sell most in early July 2024?
A: From July 1 to 6, the National Pension Service net sold Samsung Electronics for 201.6 billion won (the largest net sell) and net bought SK Hynix for 108.1 billion won (the largest net buy). Other significant net sells included SK Square (196.7 billion won) and Samsung Electro-Mechanics (124.5 billion won).
Q: When does SK Hynix's ADR list on Nasdaq and what is the share conversion ratio?
A: SK Hynix's American Depositary Receipt (ADR) is scheduled to list on the U.S. Nasdaq exchange on July 10. One ADR share equals 0.1 ordinary shares traded in South Korea, meaning 10 ADR shares correspond to one domestic ordinary share.
Q: Why do analysts expect limited market impact from NPS rebalancing?
A: Analysts predict limited impact because the National Pension Service reduced its annual, monthly, and daily rebalancing limits and can adjust execution speed. The actual rebalancing execution scale and speed are undisclosed, reducing the likelihood of large selling volumes hitting the market simultaneously.
