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NPS to cut back in Korean stock exposure

Welfare Minister Park Neung-hoo (Yonhap)
Welfare Minister Park Neung-hoo (Yonhap)
South Korea’s public pension fund National Pension Service on Wednesday has affirmed its plan to shrink its exposure to domestic stocks in a move to ward off uncertainties due to fallout from the coronavirus outbreak, Welfare Minister Park Neung-hoo told reporters Wednesday.

“(NPS) is certainly lowering the allocation of Korean stocks from the mid- to long-term perspective,” said Park, who also heads NPS Investment Management Committee.

He added NPS Investment Management Committee will also act to mitigate domestic market fluctuation as NPS is given flexibility to do so in allocating the assets.

The remarks came as the pension fund, which was overseeing some 737.5 trillion won ($598.7 billion) assets as of end-February, confirmed its asset allocation for its mid-term fund management scheme in the coming five years until 2025. The Korean stock allocation is expected to reduce to 15 percent of the entire assets by 2025, from some 20 percent as of end-2019.

NPS, the world’s third-largest pension fund, has logged 11.31 percent rate of return annually. The figure is the highest since the inception of NPS Investment Management Committee in 1999.

But due to the coronavirus fallout, NPS has sought to decrease its stock exposure this year. From January to February, its Korean stock holdings shrank by some 10 trillion won, while its foreign stock exposure shed over 4 trillion won, according to the latest data.

Its Korean stocks took a 7.8 percent loss if combined over the cited period, while those of foreign stocks dropped 3 percent.

But the increase in fixed-income assets and alternative investments have offset the decline in stock holdings, leading to a 0.1 percent uptick of its assets under management, data also showed.

“The coronavirus impact on the financial market is stabilizing, but the long-term macroeconomic view is still unpredictable,” Park said in his keynote speech during the committee meeting. “(NPS) will pursue stable returns on its investment as a long-term investor.”

By Son Ji-hyoung (