Accra:Seoul South Korea's recent market downturn has highlighted the challenges faced by the National Pension Service (NPS) in maintaining its investment strategy, particularly in the context of a fluctuating stock market.
According to Yonhap News Agency, the NPS, which is responsible for managing pension contributions to support retirement over the long term, has come under criticism for loosening its investment discipline. This year, the NPS increased its domestic-stock allocation target and postponed rebalancing, allowing it to retain more shares during a market rally. This decision has left the fund with less flexibility to respond once prices began to fall.
The reported value of NPS holdings in significant stakes in 287 listed companies decreased by approximately 182 trillion won ($137 billion) between June 30 and a recent Thursday. Samsung Electronics and SK hynix represented about 72 percent of this decline, indicating a heavy reliance on these two chipmakers within the NPS portfolio.
While the declines in market value are not realized losses, the magnitude of the drop raises concerns about the NPS's decision to relax its allocation rules at what appears to have been near the market peak. NPS managers have defended their actions, stating that adhering strictly to previous rules would have necessitated substantial daily sales, potentially disrupting trading.
In addition, questions have been raised about the oversight of leveraged exchange-traded funds linked to Samsung Electronics and SK hynix, which were fast-tracked through the listing process. Retail investors reportedly experienced more than 2.3 trillion won in losses on such financial products during a short period.
The NPS's decisions remain difficult to evaluate fully, as the minutes from committee meetings that approved the investment changes will not be released until 2030. While this delay protects market-sensitive information, there is a call for the NPS to clarify the principles guiding its significant policy adjustments.
The South Korean government is urged to ensure that the NPS's allocation decisions remain insulated from short-term policy influences and to mandate independent reviews of major changes to maintain market stability and public confidence.