Refer Report
On the 29th, KOSPI closed at 2455.91, down 48.76 points (1.95%) from the previous day. Yonhap News
As the domestic stock market crashed in earnest in the second half of the year, the National Pension Service’s domestic stock returns fell to the 0% range. As a result, the National Pension Service’s domestic stock valuation evaporated by nearly 13 trillion won in three months. Fortunately, the overall rate of return was defended as the rate of return on foreign stocks and domestic bonds rose.
The National Pension Service’s fund management headquarters announced on the 29th that the overall fund management rate of return at the end of the third quarter recorded 9.18% (provisional value). The rate of return decreased by 0.53 percentage points compared to the first half of last year (9.71%).
National Pension Service 3rd quarter fund operation rate of return (provisional). National Pension Service
The reason the fund management rate of return was lowered was because the domestic stock market continued to crash and the rate of return on domestic stocks, which accounted for 12.7% of the total fund, plummeted. The rate of return on domestic stocks in the first half of the year was 8.61% and the valuation was about KRW 158.7 trillion, but in the third quarter, the rate of return on domestic stocks plummeted to 0% (0.46%) and the valuation decreased to KRW 145.766 trillion. In just one quarter, the assessed value of the national pension evaporated by about 13 trillion won. Domestic stocks account for 12.7% of the total fund.
On the other hand, the returns in the overseas stocks and domestic bonds sectors, which account for 34.8% and 29.3% of the total fund, respectively, improved. The rate of return on overseas stocks rose from 20.47% to 21.35% in the first half of the year, and the valuation was about 399 trillion won, an increase of about 8 trillion won compared to the previous quarter.
The National Pension Service said, “Overseas stocks rose due to the U.S. interest rate cut and a rally centered on large technology stocks, and the operating rate of return was good due to the rise in the won-dollar exchange rate, while domestic stocks fell due to concerns about the performance of large technology stocks.”
The yield on domestic bonds rebounded from 1.66% to 4.09% over the same period as bond interest rates fell due to the U.S. Federal Reserve’s interest rate cut, increasing the valuation by about 5 trillion won.
Overseas bond yields fell by about 1 percentage point compared to the previous quarter to 6.97%, and alternative investments, including real estate, fell by about 3 percentage points to 5.05%. Among all sectors, domestic stocks performed the most poorly.
KOSPI, which was close to the 2900 level in early July, dropped to 2593.27 at the end of September, down from the beginning of the year. In the third quarter, KOSPI fell 7.31%. Foreign investors, the main supply and demand entities, fled due to concerns about an economic recession in the United States, and as concerns over worsening conditions in the semiconductor industry became more serious, the stock prices of Samsung Electronics and SK Hynix fell significantly. As of the end of last year, Samsung Electronics and SK Hynix accounted for 28.91% of the total domestic stocks of the National Pension Service, and at the end of the third quarter, Samsung Electronics’ stock price plummeted by 24.54% and SK Hynix’s by 26.17% compared to three months ago.
Considering that the sluggish domestic stock market is not recovering, it is predicted that the National Pension Service’s domestic stock returns this year will turn negative for the first time in two years. KOSPI was pushed to 2455.91 on the 29th due to concerns about an immediate economic slump and tariff hikes by the second Trump administration in the United States.
As the sluggish operating returns of domestic stocks compared to overseas stocks continue, there are concerns that the National Pension Service’s withdrawal from domestic stocks may accelerate. The National Pension Service is gradually reducing its proportion of domestic stocks in consideration of the shock to the domestic stock market. The National Pension Service’s average rate of return over the past three years (2021-2023) was 0.21% for domestic stocks and 11.96% for overseas stocks.
Source: Korean