In a market plunge, pension funds reversed course with "buy, buy"... No large-scale selling occurred

While the KOSPI index plummeted by more than 2,400 points since July, pension funds were found to have made net purchases exceeding 100 billion won in the KOSPI market. Despite the National Pension Service launching domestic stock rebalancing this month, there was no large-scale selling from pension funds.

The National Pension Service is Korea's largest institutional investor and is considered a key driver of pension fund supply and demand. Kim Sung-ju, President of the National Pension Service Lee (President), has previously stated his intention to adhere to long-term investment principles without being swayed by stock price volatility.

According to data from the Korea Exchange on the 28th, pension funds and others made net purchases totaling 105 billion won in the KOSPI market from the 1st through today. On the day when the KOSPI fell more than 10%, they made net purchases of 113.5 billion won. "Pension funds and others" refers to a supply-demand classification that includes public pensions such as the National Pension Service, various mutual aid associations, and transactions by national and local governments. During the same period, individuals made net purchases of 19.0122 trillion won, foreigners made net sales of 18.9107 trillion won, and institutional investors including pension funds made net sales of 1.159 trillion won each.

On this day, the KOSPI index closed at 6,023.66, a sharp drop of 732.09 points (10.84%) from the previous day. This marks a decline of 28.94% (2,452.82 points) for the KOSPI index since the beginning of the month.

Pension funds and others made net sales of 218.2 billion won on the 1st, the largest selling volume so far this month. They made net purchases of 86.8 billion won on the 14th, and net sales of 70.7 billion won and 72.3 billion won on the 22nd and 27th, respectively. While the National Pension Service dismissed the possibility of large-scale short-term profit-taking due to domestic stock rebalancing, trading trends for pension funds and others also showed net purchases.

Some market observers have suggested that the National Pension Service is holding back on profit-taking due to concerns over expanding volatility even during periods of sharp stock price declines. There is also a view that it has become practically difficult for the National Pension Service to realize short-term profits despite falling stock prices, depending on volatility triggered by single-stock leverage ETFs (exchange-traded funds). This is because if the National Pension Service sharply reduces its domestic stock holdings, there is a risk of exacerbating market volatility amplified by leverage ETFs.

As stock prices surged briefly before plummeting, the appropriateness of the National Pension Service's strategic ambiguity, such as the non-disclosure of the upper limit for its domestic stock holdings in May, also came under scrutiny. Criticism was raised, centered on opposition parties, that national pension funds were mobilized to boost domestic stock prices for political reasons ahead of the the 3rd nationwide local elections.

President Lee Jae-myung asked at a work report held at Cheong Wa Dae on the 16th by the Ministry of Economy and Finance, the National Data Office, the Financial Services Commission, and the Ministry of Planning and Budget: "There are rumors that domestic stocks were bought heavily due to local elections, driving up stock prices. Did you actually purchase domestic stocks before the election?" In response, Kim Sung-ju, President of the National Pension Service Lee (President), said, "That is completely untrue," dismissing the theory that stock prices were boosted for election purposes.

Kim Lee (President) stated, "We did not buy or sell any more than usual; it was simply because the KOSPI index rose, increasing our asset value." He added, "We are also investors and must generate profits to return pensions to the people, but with such intense focus on us, it is becoming difficult to manage pension funds calmly."

Kim Lee (President) posted a message titled "The Rise and Fall... National Pension?" on social media (SNS) on the 22nd, saying, "Especially during times of high volatility like now, where markets fluctuate sharply, we are not swayed by joy or sorrow but are adhering to investment principles based on long-term breathing and a long-term perspective as long-term investors."

Earlier, Kim Lee (President) said on the 1st, "The National Pension Service is not an institutional investor that buys stocks immediately after they rise to realize profits or sells them immediately when they fall." He urged, "Please do not be swayed by some experts or media reports who are inciting excessive fear by mentioning a 'sell-off bomb' or engaging in clickbait, nor be swayed by market volatility."