Propping up Market
According to the Korea Exchange, pension funds recorded a net purchase of 1.3838 trillion won (US$1.2689 billion) in the Korea Composite Stock Price Index (KOSPI) between December 2014 and Jan. 12 this year, increasing their net purchase by 22.2 percent from a year ago, and almost doubling it from two years earlier.
Last year, pension funds played a less-than-expected role in the Korean stock market. Their net buying had more than doubled from 4.0445 to 10.1939 trillion won (US$3.7087 to $9.3475 billion) between 2012 and 2013, but dropped back to 5.1439 trillion won (US$4.7168) in 2014. “The rapid decline can be attributed to the increased volatility of large-cap stocks due to plummeting oil prices and the government’s dividend policy that started in earnest late last year,” Hyundai Securities explained, adding, “This year, however, macroeconomic variables such as oil prices and foreign exchange rates are likely to be stabilized, and companies are expected to increase dividend payments, which signals that pension funds will increase their net purchase.”
The National Pension Service is predicted to top 100 trillion won (US$91 billion) in domestic stock investment this year. According to its pension fund management plan, the agency is going to increase the amount of its domestic shares to 106 trillion won (US$97.2 billion) by the end of this year. The investment added up to approximately 84.8 trillion won (US$77.8 billion) at the end of October 2014.
The Government Employee Pension Corporation recently fixed its shareholding target for this year at 27 percent. About 1.16 trillion won (US$1.06 billion) of its funds is expected to flow into the stock market, given that its operating assets are around 4.3 trillion won (US$3.9 billion). The Korea Teachers Pension increases its investment, too. “Although our target shareholding ratio remains at 25 percent, our additional investment in the Korean stock market for this year is estimated to reach 270 billion won [US$248 million] as the size of the fund itself increases,” the corporation said.