The National Pension Service (NPS) lost more than 182 trillion won on its domestic stock holdings in the third quarter, as South Korea's equity market swung through a period of extreme volatility. The scale of the paper losses is likely to intensify political criticism of the fund's decision to suspend rebalancing of its domestic equity portfolio.
The combined value of the 287 listed companies in which the NPS holds stakes of 5% or more — and for which it discloses its holdings — fell by 182.3963 trillion won in about three months, according to data from financial information provider FnGuide released on the 18th. The value of the fund's domestic stock holdings stood at 515.9293 trillion won on June 30 but dropped 35.3% to 333.533 trillion won as of the 15th of this month. It was the first quarterly decline in the value of the fund's stock holdings since the fourth quarter of 2024, seven quarters earlier, and the loss was the largest on record.
The decline was concentrated in large-cap semiconductor stocks. The value of the fund's SK hynix holdings fell by 74.2261 trillion won and its Samsung Electronics holdings by 56.871 trillion won, for a combined drop of 131.0971 trillion won from the two stocks alone. Over the period, Samsung Electronics shares fell to 210,000 won from 334,000 won, while SK hynix slid to 1.262 million won from 2.65 million won. As of the 15th of this month, the NPS held a 7.84% stake in Samsung Electronics and a 7.32% stake in SK hynix.
Of the 287 stocks in which the fund holds more than 5%, the value of holdings fell in 176. The value of its SK Square holdings dropped by 10.8698 trillion won and its Samsung Electro-Mechanics holdings by 7.5914 trillion won. By contrast, the value of its SK Innovation holdings rose by 904.1 billion won as a share-price gain combined with an increase in the fund's stake. The value of its holdings also rose in S-Oil (710.7 billion won), LG Energy Solution (580.8 billion won) and Hanwha Solutions (434.7 billion won).
As the paper losses snowballed, criticism of the fund's investment policy has grown. The NPS Fund Management Committee temporarily suspended rebalancing of domestic equities on Jan. 26. A surge in share prices had left the fund needing to sell some domestic stocks to bring each asset class back to its target weighting, but the committee decided to delay that step. The NPS ended the suspension at the end of June and resumed rebalancing on July 1. During that period, the target weighting for domestic equities was raised to 14.9% in January and 20.8% in May, from an initial 14.4%.
NPS Chairman Kim Sung-joo told a parliamentary audit by the National Assembly's Health and Welfare Committee on the 14th of this month that the suspension was intended to limit the market shock from large-scale selling. "If the Fund Management Committee had followed the rules in January without suspending rebalancing, we would have had to dump more than 800 billion won a day, more than 10% of KOSPI trading value, which would have delivered an enormous shock to the market," Kim said. "Share prices would fall, the National Pension Service would take losses, and the public would inevitably lose out as well."
The opposition questioned the consistency of the fund's investment principles and the transparency of its decision-making. Rep. Kim Tae-ho of the People Power Party said it was necessary to establish "whether the decision was made with the public's retirement in mind, or to suit the government's preferences." Rep. Baek Jong-heon of the same party said the Korea Teachers Pension and the Korea Post had both reported no cases of suspending rebalancing because of market conditions over the past decade. "The National Pension Service should explain more clearly to the public why it delayed and how it managed the risk," he said.
The fund continued to adjust individual stakes even through the sharp decline. It raised its stake in GS E&C to 12.88% from 7.82% and in Hyundai Marine & Fire Insurance to 12.37% from 9.42%. It cut its stake in Paradise to 8.39% from 12.33% and in Samsung Biologics to 6.56% from 10.27%. Of the 84 stocks in which it increased its stake, seven were KOSDAQ-listed, while 21 of the 82 stocks in which it reduced its stake were on the KOSDAQ.
