Pension funds snap up Samsung after stock rout

South Korea's pension funds have loaded up on shares of Samsung Electronics Co. amid the tech behemoth's stock rout in the wake of its smartphone fiasco, industry sources said Monday.

Samsung, the top cap and darling of the South Korean stock market, decided last week to suspend production of the Galaxy Note 7 and pull the flagship smartphone out of the market after failing to resolve the battery-fire problem, sending its shares into a freefall.

According to the sources, pension funds, one of the nation's largest institutional investors, bought a net 140.3 billion won ($123 million) worth of Samsung shares during the four trading days from Tuesday. A day later, their net buying reached 75.8 billion won, a yearly high for daily Samsung net purchases.

Pension funds' net buying of Samsung shares struck a contrast to uneven trading patterns by other institutional investors.

Securities companies are estimated to have sold a large amount of Samsung shares on Thursday to take profits from a gap in spot and future prices.

Local investment trust companies sold a net 10 billion won during the four-day period, with foreign investors' net selling reaching a whopping 613.2 billion won.

Analysts said pension funds appear to have engaged in bargain hunting as the Galaxy Note 7 episode sent Samsung's share price plunging to the 1.5 million won range after hitting a record high of 1.7 million won days earlier.

Samsung nose-dived 10 percent on Wednesday after an 8-percent drop the previous session, wiping nearly $19 billion off its market value. But the market bellwether spiked 1.43 percent on Thursday before soaring 1.28 percent on Friday.

"Pension funds seem to paint a rosy picture of Samsung's mid- and long-term outlook," said Cho Seung-bin, a researcher at Daishin Securities Co. said. "They could think now is the time to buy Samsung shares on expectations the company will weather the temporary shock and post good performances next year."

Some watchers said pension funds' increased net buying of Samsung shares may help prevent the share price of the world's largest smartphone maker from falling further down the road.

The state-run National Pension Service, the largest institutional investor in South Korea, could increase holdings of Samsung and other key issues whenever the market undergoes correction, in order to meet the 20 percent domestic-share requirement out of its overall stock portfolio.

But others were less optimistic about Samsung's future share price, saying the Galaxy Note 7 fiasco has put a dent in consumer trust in the company with the smartphone's permanent withdrawal feared to speed up the downtrend in Samsung earnings.

"Samsung is faced with an unprecedented crisis," Huh Nam-kwon, chief investment officer and vice president of Shinyoung Asset Management Co. "Nobody knows how much of an impact it will have on Samsung down the road because it has damaged customer confidence in the Samsung brand." (Yonhap)