National Pension Service Equity Holdings Surge to 27.7% of Assets

The South Korean National Pension Service (NPS) saw its domestic stock holdings swell to 462조1천403억원 as of July 10, 2024, representing 27.7% of its total portfolio. The current allocation exceeds the fund’s internal target of 20.8%, prompting the pension fund to resume domestic equity rebalancing this month.

Growth Driven by Semiconductor Heavyweights

The expansion of the NPS portfolio is primarily attributed to the significant appreciation of its IT, electrical, and electronics holdings. Data from Leaders Index indicates that the value of these specific holdings climbed from 39조1천63억원 to 286조3천16억원, a 632.1% increase.

The concentration within the portfolio has intensified around two key technology companies:
* Samsung Electronics: The NPS increased its stake from 7.3% to 7.9%, with the valuation of its holdings rising by 468.8% to 131조1천387억원.
* SK Hynix: The pension fund raised its stake from 7.6% to 8.1%, with the total value of these shares jumping 1,210.1% to 125조2천187억원.

Combined, these two companies now account for 55.5% of the total value of the NPS domestic stock portfolio, up from 25.3%.

Rebalancing Strategy and Market Impact

The NPS suspended its domestic equity rebalancing in 2023 to support the local stock market. With that moratorium ending in June, the fund began adjusting its asset weightings this month to align with its strategic targets.

Concerns regarding the potential market impact of these adjustments have been addressed by government and pension officials. National Pension Service Chairman Kim Seong-ju stated on July 2 that the rebalancing process would not act as a “market bomb,” noting that the adjustments are not designed as large-scale, short-term sell-offs. Minister of Health and Welfare Jung Eun-kyung affirmed that the government would closely monitor the process to ensure market stability is maintained throughout the rebalancing period.

Sector Performance Trends

While the technology sector experienced rapid growth, other areas of the portfolio saw contrasting movements:
* Holding Companies: This sector became the second-largest concentration at 11.4% of the portfolio. SK Square saw a notable valuation increase of 1,941.7%, reaching 15조7천734억원.
* Shipbuilding, Defense, and Machinery: This sector maintained a 5.4% investment weight, with total valuations rising to 24조7천289억원.
* Contractions: The pension fund reduced its exposure in the pharmaceutical, biotechnology, and telecommunications sectors. The number of pharmaceutical and biotech firms held by the NPS dropped from 17 to 14, with total valuation decreasing to 9조7천590억원.

As of the latest filing, the NPS maintains a stake of 5% or more in 267 listed companies, an increase from 259 companies recorded in the prior analysis period.