2010-07-02 14:48

SINGAPORE - South Korea's largest fund managers are growing more bullish on the nation's stocks even as overseas investors sell, helping the benchmark Kospi index post one of only two gains among the 20 biggest equity markets last quarter.

KTB Asset Management Co and Mirae Asset Global Investments Co of Seoul say shares may rise further as Korea Exchange Inc data show domestic pension funds increased equity holdings in the first half. At the same time, foreign investors pulled a net 407.66 billion won ($330 million) from Kospi stocks in the three months that started April as Europe's debt crisis reduced the allure of riskier assets, data compiled by Bloomberg show.

Domestic investors stepped up purchases of South Korean stocks as the economy rebounded at a faster-than-forecast 2.1 percent pace in the first quarter, helped by rising exports and increased domestic demand. The 0.3 percent climb in the past quarter for the Kospi, which along with India's Sensex were the only benchmarks to rise among the largest markets, marks the first time in six quarters South Korea's index advanced as foreigners sold.

"South Korea's economy is fast recovering," said Chang In-whan, who helps manage the equivalent of $9.2 billion in assets as president of KTB. "There's ample upside left as prices remain cheap."

Chang said KTB is boosting the proportion of stocks in its portfolios, while Mirae, the nation's largest asset management company, said it has bought more technology, automobile and chemical shares over the past six months. South Korean pension funds bought a net 3.7 trillion won worth of equities this year, according to Koscom Corp, which provides financial data from the Korea Exchange.

The Kospi's gain last quarter compares with an average 8.9 percent decline in stock benchmarks for the world's 20 largest markets. The Bombay Stock Exchange's Sensitive Index is the only other benchmark to rally, climbing 1 percent, while Sweden's OMX Stockholm 30 Index was the third-best performer after a 1.3 percent retreat. China's Shanghai Composite Index tumbled 23 percent, the most among the biggest markets.

The South Korean index fell 0.7 percent to 1,686.24 in Seoul, the lowest close since June 11.

South Korea's National Pension Service intends to boost holdings of domestic equities to 16.6 percent of its portfolio this year from 13.1 percent in 2009, the Ministry for Health, Welfare and Family Affairs, which oversees the fund, said. The country's biggest investor expects assets to increase to 303.3 trillion won at the end of 2010.

Analysts remain the most optimistic on South Korea among the world's 20 largest markets even after cutting the number of "buy" ratings in the country to 51.58 percent as of June, the lowest since September 1999, according to data compiled by Bloomberg. India has the second-highest number of "buy" calls, amounting to 45.76 percent of total analyst recommendations.

Bloomberg News