South Korea pension fund key to success of market reforms, says watchdog

SEOUL : South Korea’s market watchdog stressed on Thursday the role of the public pension fund to ensure the success of ongoing capital market reforms, as the fund which has been aggressively raising overseas investments pledged to look at domestic opportunities.
“The responsible role of pension funds and asset management firms as long-term investors is paramount to expand the base of investments in the capital market,” Lee Bok-hyun, governor of the Financial Supervisory Service (FSS), said.
Lee cited the assessment of market participants that increasing domestic investments by Japan’s public pension fund had contributed to the success of its market reforms.
In February, South Korea unveiled a “Corporate Value-up Programme,” mirroring Japan’s capital market reforms, to boost the domestic stock market with measures to encourage more shareholder returns by listed companies. It has come up with several follow-up measures, including tax cuts, to beef up the programme, since then.
Lee’s comments came at a forum co-hosted by the FSS, the National Pension Service (NPS), and the Korea Exchange.
“We will seek ways to utilise ‘value-up’ policies, including a new index being developed by the Korea Exchange, to improve the fund’s profitability,” NPS Chairman Kim Tae-hyun said.
Other efforts the NPS is already taking to boost the value of listed companies, through outsourcing of investments and management work, would also continue, Kim said.
The Korea Exchange plans to provide a new stock market index, comprised of listed companies making efforts to raise market value, this month to complement the reform programme.
The NPS in recent years has been aggressively raising investments in overseas assets in a bid to get higher returns and delay the depletion of the fund. Its funds are expected to run out by 2056 due to a fast-ageing population.
The NPS, the world’s third-largest pension fund, held 1,147.0 trillion won ($857.12 billion) in assets as of the end of June. Its holdings of overseas stocks and domestic stocks accounted for 34.1 per cent and 13.8 per cent, respectively. ($1 = 1,338.2000 won)