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NPS Postpones Domestic Stock Ratio Decision

by Jay Ahon / Mar 27, 2021 05:43 AM EDT
The building of South Korea's National Pension Service.

South Korea's National Pension Service (NPS), the country's public pension fund, has delayed its decision of whether or not to increase the domestic stock holdings proportions after receiving criticisms from the stock investors over the selling streak of the fund.

The highest decision-making body of the said fund, known as NPS  investment Management, conducted a meeting on Friday to discuss the said issue; however, they were not able to reach agreements if they should raise the proportion of distribution limit of a strategic asset from 2 percentage points currently to 3 or 3.5 percentage points.

The allocation limit for the strategic asset allows the pension managers to be able to hold positions without having to sell assets even when the proportion deviates from its target ratio as asset prices change. The target for this year is 16.8 percent.

In the current rules in the fund, which allow a two percentage points fluctuation, NPS could hold their total assets up to 18.8 percent of domestic stocks. If the management agrees to increase it to 3.5 percentage points, the domestic stock exposure of NPS could reach 20.3 percent.

NPS had faced criticisms from its stock investors after selling domestic stocks consecutively for 51 business days from December 24 to March 12. The investors claim that NPS's selling position is somehow the reason behind tepid stock markets here from this year. After reaching 3,208.99 points record high on January 25 but losing gains, South Korea's primary kosipi remains at around the 3,000-point threshold.

The selling streak was partially due to a stock value increase held by a bullish stock market, which was backed by NPS. By the end of 2020, the domestic stocks' proportion accounted for total points of 21.2 percent.

National Pension Service has lowered its goal for the domestic stock from 20% in 2016 to 16.8% in 2021 in an attempt to lower its stock market influence.

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