The National Pension Service's decision to delay the sale of domestic stocks to mitigate market shock has backfired during a steep market decline. While foreign investors engaged in significant net selling, the pension fund's selling remained limited. As a result, the KOSPI index dropped over 30%, leading to a substantial decrease in the value of stocks held by the National Pension Service in major listed companies over the past three and a half months.
According to data from the Korea Exchange, from July 1 to October 16, the net selling amount by pension funds was only 46.1 billion won, while foreign investors sold a net 5.9279 trillion won during the same period. This means foreign net selling was approximately 129 times greater than that of pension funds.
During this period, the KOSPI index experienced a sharp decline, with the index falling from 8,476.48 on June 30, when the rebalancing delay ended, to 5,554.22 on October 15, a drop of 34.5%. Notably, the index plummeted 20.7% from 7,003.74 on October 2 to October 15. On October 15 alone, the index fell by 7.57%, triggering circuit breakers in both the KOSPI and KOSDAQ markets.
According to financial information provider FnGuide, the total value of stocks held by the National Pension Service in 287 listed companies, where it held more than 5% of shares as of late June or October 15, was 333.533 trillion won. This represents a decrease of 182.396 trillion won (35.3%) from 515.929 trillion won at the end of June.
The largest drop in value was seen in SK Hynix, which decreased by 74.226 trillion won. Samsung Electronics also saw a decline of 56.871 trillion won. Together, these two stocks accounted for 71.8% of the total decrease, with a combined loss of 131.071 trillion won. Additionally, SK Square and Samsung Electro-Mechanics saw decreases of 10.8698 trillion won and 7.5914 trillion won, respectively. The total decrease in value for these four stocks amounted to 149.5583 trillion won, representing 82.0% of the overall decline.
Earlier, the National Pension Fund Management Committee decided on January 26 to temporarily suspend the sale of domestic stocks, even if it meant exceeding the strategic asset allocation limits, due to increased volatility in the domestic stock market. The intention was to avoid mechanical selling that could exacerbate market shocks, even if the proportion of stock holdings exceeded target levels. On May 28, the target allocation for domestic stocks was raised from 14.9% to 20.8%, an increase of 5.9 percentage points.
As a result, the National Pension Service faced a steep market decline while maintaining a high proportion of domestic stock holdings. According to the National Pension Service, as of the end of July, its investment in domestic stocks amounted to 418.6 trillion won, accounting for 24.9% of the total fund. This is 4.1 percentage points higher than the target allocation of 20.8% for the end of the year.
A financial industry official stated, "The rebalancing delay measure, intended to mitigate market shocks, has ultimately increased exposure to the risk of stock price declines. It is necessary to reassess the effectiveness of the domestic stock asset allocation policy."
* This article has been translated by AI.
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