Korea's market rout exposes limits of National Pension Service's buying power
The Kospi fell 7.57% below 5,600 points as the National Pension Service bought only a fraction of shares after suspending rebalancing during the prior rally.
On Thursday the Kospi slid 7.57% to under 5,600 points and the Kosdaq also fell over 8%, prompting simultaneous circuit-breaker halts—the first such occurrence since July 29. The downturn followed renewed speculation about additional U.S. interest-rate hikes and doubts that AI-related investment has peaked, with regional markets like Japan and Taiwan also posting declines. Korea’s losses were amplified by the National Pension Service's minimal buying, amounting to only 35.4 billion won, against a net foreign outflow of 4.8 trillion won.
The pension fund’s constrained stance results from two suspensions of portfolio rebalancing in January and May, during which it raised its domestic equity allocation as the Kospi rallied. Critics, including labor unions and analysts, argue that abandoning standard rebalancing has turned the NPS into a source of volatility rather than a stabilising force, urging it to prioritize long-term investment duties over short-term political pressures.
Why it matters
The pension fund's limited response reduces market stability, affecting investors and retirees' savings.
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