Key Takeaways
- • The KOSPI plunged more than 8% at the open on the 6th, breaking below 5,000 and triggering a Level 1 circuit breaker at 9:03:33 a.m. that halted trading for 20 minutes; the index stood at 4,923.47 just before the halt, the first intraday loss of the 5,000 level since February 6.
- • Independent lawmaker Han Dong-hoon demanded that President Lee Jae-myung personally explain the National Pension Service's concentrated bets on Samsung Electronics and SK Hynix.
- • According to FnGuide, the value of the NPS's stakes in 287 disclosed companies fell about 182 trillion won (approximately $133.9 billion), from 515.9 trillion won at the end of June to 333.5 trillion won on October 15.
- • Samsung Electronics and SK Hynix rose from about 34% of Korea Exchange market capitalization at the end of last year to 49% as of the 4th of this month.
- • The ruling party argues that valuation declines are unrealized and should not be characterized as losses, while the episode has renewed debate over NPS return management and rebalancing.
Summary
South Korea's KOSPI fell more than 8% shortly after the open on the 6th, breaking below the 5,000 level and triggering a circuit breaker. The index had lost 460.33 points from the prior close, and the overnight US sell-off, in which the Nasdaq fell 5.5% and the Philadelphia Semiconductor Index dropped more than 12%, provided the direct trigger. It was the first intraday break of 5,000 since February 6, according to the report.
Independent lawmaker Han Dong-hoon used the decline to attack the National Pension Service's heavy concentration in Samsung Electronics and SK Hynix. In a Facebook post, he called on President Lee Jae-myung to personally explain the fund's management, noting that KOSPI 5,000 was a government policy goal. Han said the NPS raised its domestic equity target weight from 14.4% at the start of the year to 14.9% in January and 20.8% in May, and argued it should have trimmed holdings as prices rose instead. As of October 15, the NPS held a 7.84% stake in Samsung Electronics and a 7.32% stake in SK Hynix.
According to an estimate by FnGuide covering 287 listed companies in which the NPS holds stakes of 5% or more, the value of those holdings fell from 515.9 trillion won (approximately $379.4 billion) at the end of June to 333.5 trillion won (approximately $245.3 billion) on October 15, a decline of about 182 trillion won. Han described the drop as occurring before this week's crash. The ruling party counters that valuation changes are not realized losses unless shares are sold.
Market analysts cited a structural concentration problem. Samsung Electronics and SK Hynix accounted for about 34% of Korea Exchange market capitalization at the end of last year, rising to 49% by the 4th of this month, and related holding companies such as SK Square and Samsung C&T add further semiconductor exposure. The NPS typically sells mechanically to rebalance when equities rise, but this year it kept buying domestic stocks and postponed rebalancing. KB Securities researcher Ahn So-eun said concerns that the Democratic Party, which won the US Congress in the midterms, could pressure a halt to AI data center construction weighed on sentiment, while the rotation out of AI growth stocks that had supported the market after the midterms was fading.
The episode is expected to become a political dispute over pension allocation and the government's market-support stance. Whether the NPS adjusts its domestic equity weight and when it resumes rebalancing are emerging as key variables for supply and demand in the Korean market.
Independent lawmaker Han Dong-hoon used the decline to attack the National Pension Service's heavy concentration in Samsung Electronics and SK Hynix. In a Facebook post, he called on President Lee Jae-myung to personally explain the fund's management, noting that KOSPI 5,000 was a government policy goal. Han said the NPS raised its domestic equity target weight from 14.4% at the start of the year to 14.9% in January and 20.8% in May, and argued it should have trimmed holdings as prices rose instead. As of October 15, the NPS held a 7.84% stake in Samsung Electronics and a 7.32% stake in SK Hynix.
According to an estimate by FnGuide covering 287 listed companies in which the NPS holds stakes of 5% or more, the value of those holdings fell from 515.9 trillion won (approximately $379.4 billion) at the end of June to 333.5 trillion won (approximately $245.3 billion) on October 15, a decline of about 182 trillion won. Han described the drop as occurring before this week's crash. The ruling party counters that valuation changes are not realized losses unless shares are sold.
Market analysts cited a structural concentration problem. Samsung Electronics and SK Hynix accounted for about 34% of Korea Exchange market capitalization at the end of last year, rising to 49% by the 4th of this month, and related holding companies such as SK Square and Samsung C&T add further semiconductor exposure. The NPS typically sells mechanically to rebalance when equities rise, but this year it kept buying domestic stocks and postponed rebalancing. KB Securities researcher Ahn So-eun said concerns that the Democratic Party, which won the US Congress in the midterms, could pressure a halt to AI data center construction weighed on sentiment, while the rotation out of AI growth stocks that had supported the market after the midterms was fading.
The episode is expected to become a political dispute over pension allocation and the government's market-support stance. Whether the NPS adjusts its domestic equity weight and when it resumes rebalancing are emerging as key variables for supply and demand in the Korean market.
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