(June 14, 2012) — South Korea’s National Pension Service (NPS), with around $300 billion in assets, has decided to raise its allocation to domestic equity, ensuring that an additional $5.7 billion will be invested in South Korean stocks in 2013.
The fund will raise its current allocation of 19.3% to 20% in 2013, and plans to further enhance that allocation to more than 20% by 2016. At the same time, the fund will reduce its allocation to domestic fixed income from 59.3% in 2012 to 56.1% in 2013.
“The higher weighting in stocks is of course positive given that the fund’s investment is serving as a good support to the market amid ongoing volatility in financial markets stemming from Europe,” Kim Jae Dong, Head of Equities at SEI Asset Korea Co., told Bloomberg. “Compared with other overseas pensions, NPS’s stock weighting is still low and I think it’s taking a right approach to continue diversifying its assets.”
South Korea’s equity market took a beating in May with the Korea Composite Stock Price Index (KOSPI) sliding 7%. An export-dominated economy, South Korea has been buffeted by European turmoil. The International Monetary Fund recently dropped its forecast for South Korea’s 2012 economic growth from 3.5% to 3.25%, citing “the weakening global outlook” as the culprit.
In this light, the government-controlled NPS’ plan may be designed to function as a form of fiscal stimulus. It would not be the first Asian asset owner that has shifted its asset allocation in recent days with an eye toward shoring up its domestic economy as the Eurozone unravels. China’s $150 billion National Social Security Fund and the $410 billion China Investment Corporation (CIC) both made moves to increase their investments in China itself, in the CIC’s case explicitly at the expense of its European equity and fixed income investments.