Market Welcomes Resumed Buying By Trust Firms

Investment trust companies have returned to Korean equities.

They were the major driving force, along with foreign investors, behind the local stock market's rally in 1999, but then turned into the biggest seller last year, pulling down the composite index.

Although the amount of their equity purchases is not heavy yet, the mere shift of their positions helps remove some burdens on the index.

Investment trust firms purchased shares worth 118.7 billion won ($94.7 million) so far this month after selling 504.4 billion won of stocks in January. Analysts attributed the resumed purchase to falling bond yields, which put more liquidity in local capital markets. In addition, they say, investment trusts are seeking blue chip bargains ahead of a proposed increase in stock investments by state pension funds.

The amount of money placed with investment trusts, which shrank last year, also rose a bit, adding to their purchasing power. As of Monday, the balance stood at 4.19 trillion won, up by 132 billion won from the end of last year.

"As investors rushed to redeem their funds, investment trust firms had to sell stocks to meet the cash calls," said Kim Sung-tae, a fund manager at CJ Investment Trust & Management Co. "However, the cash outflows have stopped this year, and we have more room for purchases."

As investment trust firms have resumed buying shares, their influence on the market has also grown bigger. Now they account for around 10 percent of stock market turnover, up from the usual 5 to 6 percent.

by Chung Jeh-won