Key Takeaways
- • Korea's National Pension Service (NPS) has offered little cushion to foreign selling that pushed the Kospi below 5,000 on Friday, with pension funds buying just 29 billion won against 262.6 billion won of net foreign selling, according to Korea Exchange data cited by Korea JoongAng Daily.
- • Pension funds' net purchases over the previous five sessions totaled 1.41 trillion won versus 9.37 trillion won of net foreign selling, a sharp contrast with the 2025 tariff shock when pension buying offset roughly half of foreign selling.
- • NPS domestic equity exposure surged to 29.4 percent by the end of May against a strategic target of 20.8 percent after the rally, limiting its ability to buy during the downturn.
- • Policymakers temporarily waived rebalancing requirements in January and raised the Korean equity target from 14.9 percent to 20.8 percent by May, measures critics say left the fund with little flexibility when the market reversed.
Summary
Korea's state pension funds have offered little support during the latest wave of foreign selling that pushed the Kospi below 5,000 on Friday, according to Korea JoongAng Daily. Trading in Kospi-listed shares was suspended for 20 minutes shortly after the open when the index plunged more than 8 percent. The benchmark later traded as low as 4,911.28 and closed at 5,059.69.
Foreign investors sold a net 262.6 billion won ($193.8 million) of Kospi-listed shares, while pension funds, including the NPS, bought a net 29 billion won, according to Korea Exchange data released Saturday. Pension net purchases equaled about 11 percent of foreign net sales and 57 percent of net retail purchases of 50.8 billion won. Over the previous five trading sessions, foreign investors sold a net 9.37 trillion won, retail investors bought 4.03 trillion won and pension funds bought 1.41 trillion won.
The contrast with the U.S. tariff-driven turmoil of March and April 2025 is stark. Pension funds net bought 8.35 trillion won from Dec. 4, 2024, the day after martial law was declared, through the April 2025 tariff shock, offsetting roughly half of foreign investors' 19.14 trillion won of net selling. During the Covid-19 sell-off in March 2020, pension funds poured a net 3 trillion won into Kospi-listed stocks in a single month.
Analysts attribute the constraint largely to the NPS's domestic equity allocation. Domestic stocks made up 11.5 percent of the portfolio at the end of 2024, below a 15.4 percent target, but rose to 18.1 percent by the end of 2025, exceeded 20 percent in January and reached 29.4 percent by the end of May as the rally lifted valuations. Normally the NPS sells domestic stocks to rebalance when holdings exceed the upper bound of its strategic range. The National Pension Fund Management Committee temporarily waived those requirements in January and by May raised the Korean equity target to 20.8 percent from 14.9 percent, widened the tolerance band and reduced the daily ceiling on portfolio adjustments. Those measures were intended to prevent forced selling from disrupting the rally but left the fund with limited capacity to add stocks as the market reversed.
Yun Suk-myung, an honorary research fellow at the Korea Institute for Health and Social Affairs, said that selling during the rally could have given the fund room to buy on declines, and warned that bending rebalancing rules has missed a window for structural pension reform.
Foreign investors sold a net 262.6 billion won ($193.8 million) of Kospi-listed shares, while pension funds, including the NPS, bought a net 29 billion won, according to Korea Exchange data released Saturday. Pension net purchases equaled about 11 percent of foreign net sales and 57 percent of net retail purchases of 50.8 billion won. Over the previous five trading sessions, foreign investors sold a net 9.37 trillion won, retail investors bought 4.03 trillion won and pension funds bought 1.41 trillion won.
The contrast with the U.S. tariff-driven turmoil of March and April 2025 is stark. Pension funds net bought 8.35 trillion won from Dec. 4, 2024, the day after martial law was declared, through the April 2025 tariff shock, offsetting roughly half of foreign investors' 19.14 trillion won of net selling. During the Covid-19 sell-off in March 2020, pension funds poured a net 3 trillion won into Kospi-listed stocks in a single month.
Analysts attribute the constraint largely to the NPS's domestic equity allocation. Domestic stocks made up 11.5 percent of the portfolio at the end of 2024, below a 15.4 percent target, but rose to 18.1 percent by the end of 2025, exceeded 20 percent in January and reached 29.4 percent by the end of May as the rally lifted valuations. Normally the NPS sells domestic stocks to rebalance when holdings exceed the upper bound of its strategic range. The National Pension Fund Management Committee temporarily waived those requirements in January and by May raised the Korean equity target to 20.8 percent from 14.9 percent, widened the tolerance band and reduced the daily ceiling on portfolio adjustments. Those measures were intended to prevent forced selling from disrupting the rally but left the fund with limited capacity to add stocks as the market reversed.
Yun Suk-myung, an honorary research fellow at the Korea Institute for Health and Social Affairs, said that selling during the rally could have given the fund room to buy on declines, and warned that bending rebalancing rules has missed a window for structural pension reform.
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