[Anchor]

Reporter Han Jiyeon is here for Thursday's "Friendly Economy." Han, it seems the National Pension Service faced heavy criticism during this parliamentary audit.

[Reporter]

The focus of criticism was that the fund held onto stocks instead of selling them as its rules dictated.

Opposition lawmakers pressed the service, asking, "Is the National Pension Service a stock market support fund?"

The rules in question refer to rebalancing.

The National Pension Service allocates its nearly 1.7 trillion won across various baskets such as stocks and bonds based on predetermined ratios.

For example, if the stock allocation is set at 15% and stock prices rise to push that share to 25%, it is supposed to sell the excess to secure profits, or buy more if prices drop to readjust the ratio.

It functions as a sort of automatic brake, selling when prices are high and buying when they are low.

However, as the stock market heated up this year, the National Pension Service released this brake.

At the end of January, when the Kospi was eyeing the 5,000 mark, it decided not to sell even if holdings exceeded the target until June.

At the end of May, it raised the domestic stock target weight from 14.9% to 20.8% and even widened the allowable deviation limit, allowing holdings of up to 28.8%.

It changed the rules twice in the middle of the game.

Even so, the ratio at the end of June reached 29.1%, exceeding even the expanded limit.

Looking at how other entities handled this:

The Pension Fund for Private School Teachers and the postal savings service have never delayed rebalancing over the past 10 years, and the Government Employees Pension readjusted according to the rules within a month when limits were exceeded.

Opposition lawmakers argued that the rules were changed after the president repeatedly mentioned the domestic stock proportion.

[Anchor]

As a result, there have been criticisms that the National Pension Service amplified stock market volatility.

[Reporter]

The criticism is that while the National Pension Service held its ground, foreign investors heavily sold off at the peak and exited, leaving individual investors to absorb the dumped volume.

The Kospi soared to the 9,300 level during trading on June 19, but plummeted by nearly 6% in a single day on July 29 down to the 5,600 level.

Circuit breakers were triggered on both the Kospi and Kosdaq for the first time in history for two consecutive days.

Meanwhile, foreign investors sold off over 190 trillion won this year alone through early August.

In particular, they sold 110 trillion won worth of shares in May and June alone, when the stock market was at its hottest.

Conversely, individual investors purchased 110 trillion won worth.

On average, this meant individuals bought around the Kospi 7,400 level, and as the index slumped below that, securities firms analyzed that 80% of retail net purchases entered the loss zone.

As stock prices fell, the value of domestic stocks held by the National Pension Service shrank by 124조 won in July alone, and the total fund decreased by 181조 won during the same period.

Critics point out that while the service should have bought stocks to refill its share when prices dropped according to the rules, its capacity to buy was already limited because it held amounts exceeding the limit just before the sharp drop.

At the same time, concerns over the semiconductor industry heavily influenced the July plunge.

Some analyses also suggested that the twice-leveraged ETFs for Samsung Electronics and SK Hynix introduced at the end of May further heightened volatility.

[Anchor]

The National Pension Service must have offered explanations; were they persuasive?

[Reporter]

No. They responded that if they had sold according to the rules, the market would have collapsed instead.

Chairman Kim Sung-joo stated that without the deferral, they would have had to dump about 800 billion won per day, equivalent to roughly 10% of the Kospi's daily trading value.

He emphasized that the decision was made unanimously with private experts and that government orders have never simply been passed as-is.

He also explained that the reason meeting minutes are not disclosed immediately is due to a 2013 regulation allowing the disclosure of agenda items that could impact the market to be delayed by up to four years through a Fund Management Committee resolution.

The National Pension Service stated that even after experiencing the July plunge, its performance is estimated to have been better than if it had operated under the original rules.

However, it added the caveat that results could vary significantly depending on the period evaluated.

The total return rate as of the end of July, most recently disclosed, was 14.8%, and the domestic stock return rate was 60%.

However, because the stock market has slipped further since then, putting even the 6,000 line at risk this week, it is no time to let down guard.

There are also remaining tasks.

The Fund Management Committee, which decides the investment direction of the National Pension Service, is chaired by the Minister of Health and Welfare and has a high proportion of government-side members.

The chairman mentioned the need to increase representative members for subscribers, such as working employees and self-employed individuals who pay into the pension.

The meeting minutes detailing the rule changes will not be made public until 2030, and opposition lawmakers are even threatening a parliamentary investigation.