National pension, less stocks to sell right now… Breathing in the supply and demand of large-cap stocks

◆ Braking the sale of domestic stocks in pensions ◆

As the National Pension Fund Management Committee expanded the range of domestic stock holdings on the 9th, the sale of pension funds is expected to calm down for the time being. The National Pension System invests over 800 trillion won in domestic and foreign stocks, bonds, and real estate. Each asset’s share of holdings and the allowable range for churn are set.

The key to this day’s decision is to increase the allowable range of strategic asset allocation (SAA) for domestic stocks from ±2% points to ±3% points. Until the end of this year, the national pension target’s share of domestic stocks remains unchanged at 16.8%. However, by increasing the SAA allowance range by 1 percentage point, the domestic stock SAA allowance range will increase from 18.8% to 19.8%. To this extent, it will allow them to hold many domestic stocks.

Increasing the allowable range of SAA will increase the number of containers that can hold domestic stocks. It can have the effect of reducing the number of stocks that need to be sold right away. However, since the entire deviation range is maintained at ±5% points, the allowable range for tactical asset allocation (TAA) has been adjusted to ±2% points.

The current operating scale of the national pension is estimated at a total of 870 trillion won. As of the end of last year, the share of domestic stocks in the national pension reached 21.2%, but it is expected that the share of domestic stocks held in Korea has decreased to about 20%, or about 174 trillion won, due to the recent successive selling. It is expected that if the SAA standard had not changed, it would have been necessary to sell an additional 2 trillion won worth of stocks, but the Fund Committee gave 1 percentage points to spare, creating a margin of 7 trillion won, which will relieve the selling pressure.

The Foundation said that it has taken this action in consideration of the fact that the frequency and scale of deviating from the allowable range has increased over the past three years, and that it has deviated from the upper limit of the allowable range for the last four consecutive months. In addition, in the process of setting the weight of assets in 2011, it was judged that it was necessary to expand and adjust the allowable range of domestic stocks as the allowable range of domestic stocks was set narrower than that of other asset classes. Domestic stocks held by the National Pension Service exceeded the upper limit of SAA four times during the three years from 2016 to 2018. It left four times in 2019, two times in 2020, and three times in the first quarter of this year.

Minister of Health and Welfare and Chairman of the National Pension Fund Management Committee, Kwon Deok-cheol, said, “Even at the end of March, the share of strategic asset allocation of domestic stocks exceeded the upper limit of the allowable range.” I said. Minister Kwon explained that the ±3.5% point accurately reflects the current market situation, but since there are many opinions from the committee members to smoothly change it, the ±3% point plan was chosen.

The Fund Committee has discussed ways to expand the scope of strategic asset allocation as investors rebelled against the net selling of national pension stocks in Korea, which continued from the end of last year. “There are not only individuals, foreigners, and institutions in the market,” said Lee Hyung-hoon, director of pension policy at the Ministry of Health and Welfare. “The members agree that the market should be operated while reducing the impact of the market as much as possible.”

In addition, the Fund Committee announced that it will have a procedure to regularly judge the rebalancing system in the future. An official from the Fund said, “We decided to have a procedure to determine the necessity of adjustment on a regular basis,” and said, “We will also prepare a procedure to review the profitability and stability of the fund.”

Since last year, as the domestic stock market has risen, the share of domestic stocks in the National Pension Service has rapidly increased. Pension funds such as the national pension net sold 17 trillion 2164 billion won in the stock market and the KOSDAQ market from January 4 to April 9 this year. In the securities market alone, they net sold 16,701.2 billion won. However, according to this decision, the market expects that the burden of mechanically selling stocks in the domestic stock market will be relieved somewhat.

Hwang Se-woon, a research fellow at the Capital Market Research Institute, said, “It can serve as positive news for the domestic stock market in terms of the fact that the sale of the national pension may be reduced in the short term.” When the time comes to dispose of stocks through payments, etc., the market may be shocked, so a careful approach is necessary,” he said. It is also pointed out that the increase in the scope of stock holding by the National Pension System is a political decision taking into account the dissatisfied public opinion of Donghak ants, and whether it undermines independence.

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▷Strategic Asset Allocation (SAA) Allowed Range : Based on the target weight set by the National Pension Fund Management Headquarters, this refers to the extent to which the stock price rises or falls within the allowable range. When domestic stocks fall outside this range, the fund management center’s manager adjusts its portfolio to fall within the allowable range through a buy (sell) transaction.

▷Tactical Asset Allocation (TAA) Allowable Range : Refers to the range of discretionary powers given to the fund management headquarters managers. The larger the TAA, the greater the discretion of the fund management center’s managers, and the smaller it is, the more limited the manager’s efforts to achieve excess performance.

▷Rebalancing : Buying (selling) an asset to meet the target weight according to the strategic asset allocation (SAA).

[김정범 기자 / 신화 기자]
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