NPS to reduce investment in Seoul stocks

National Pension Service Chairman and CEO Kim Sung-joo

By Jhoo Dong-chan

The National Pension Service (NPS) has decided not to increase its holdings of local stocks in 2019, news that could weigh on then minds of many equity investors.

The agency said Sunday it will adjust its investment portfolio, of which it invests only 18 percent of its assets in local stocks, down from the current 20.8 percent, by the end of next year.

During its recent committee meeting, the NPS decided to set the investment volume of domestic stocks at 131.7 trillion won in 2019, accounting for 18 percent of the agency's investment portfolio.

The NPS held 129.6 trillion won worth of domestic stocks as of February. If the value of the stocks owned by the NPS goes up a bit, it won't be able to invest new money in the nation's stock market.

While it reduces the domestic ratio to 18 percent by the end of 2019, it will raise the ratio of its foreign stocks to 20 percent from current 17.7 percent in the period.

It will be the first time for the NPS to invest more in foreign stocks than in domestic stocks, and the Ministry of Health and Welfare added it will further lower the domestic ratio to 15 percent by the end of 2023.

"The NPS has been the backbone of the domestic stock market. The decision will negatively influence investor sentiment," said a Nomura Securities official.

"It will also throw cold water on the government's plan to buoy the nation's Kosdaq market. The decision is likely to lead to the outflow of private investors."

The NPS accounts for about 7 percent of the domestic stock market capitalization.

An industry observer, who declined to be named, said an increasing number of people find it difficult to trust the NPS' policy following a series of its controversial investment decisions, including the merger between Samsung C&T and Cheil Industries.

"It will definitely sour the domestic stock market. Its role to prevent domestic stock market fluctuations caused by foreign investors will be reduced."

The decision is attributed to the belief that the NPS has invested a higher portion of its assets in domestic stocks than other foreign pension funds do, which has led to a decline in profitability and an increase in volatility.

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