NPS's asset portfolio allows more local stocks

NPS's asset portfolio allows more local stocks

The headquarters of National Pension Service located in Jeonju / Yonhap

By Anna J. ParkAs the benchmark KOSPI is undergoing a prolonged correction, market watchers are focusing on whether the massive buying power of the National Pension Service (NPS), the country’s largest institutional investor, will be used to reverse the depressed local stock markets.The main bourse has been hovering below 3,000 points since September, due primarily to unfavorable external economic conditions, including global supply chains disruptions and increased uncertainty from the emergence of new COVID-19 variants. Its current level is down around 10 percent from the index’s highest point this year. Some market insiders believe the NPS ― with estimated assets exceeding 918 trillion won ($772 billion) as of the end of September ― could fire up local markets by adding 10 trillion won worth of local stocks to its portfolio. According to data from the Korea Exchange (KRX), the NPS held 169.4 trillion won worth of Korean shares at the end of September, or around 18.4 percent of its entire assets worldwide. Considering that this year’s maximum ceiling for local stocks in the NPS’s asset portfolio is set at 19.8 percent, the pension service could boost its current ownership by a further 1.4 percentage points by the end of December. In April, the NPS’s asset operating committee increased the service’s allowed holding maximum for local stocks to 19.8 percent, from the previous 18.8 percent. Given that the NPS net-sold 1.3 trillion won worth of local shares from October to November, their proportion of its entire assets had decreased by 168.1 trillion won as of Monday. This means the service could increase its holdings of local stocks by 1.5 percentage points, or about 13.7 trillion won worth, within this year. If the NPS decides to do this, it could provide a positive impetus to the Korean stock markets. A net purchase by this amount would be more than the recent average daily transactions of 11 trillion won on the KOSPI. “As the COVID-19 situation isn’t being ameliorated due to concerns about new variants and the continual spread of the coronavirus, the investor sentiment has waned considerably. If the NPS implements a massive net-purchasing of local stocks, it could contribute to the KOSPI defending the symbolic 3,000-point level,” a market insider pointed out.

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