Pension fund investing 1 trillion won on Kosdaq

The National Pension Service is riding in as a white knight to the junior stock market by investing 1 trillion won ($873.5 million) on the Kosdaq in the final quarter. NPS is also eliminating guidelines that included limiting investments to stocks whose market capitalization exceeded 100 billion won.

Unlike the primary market Kospi, the tech-heavy benchmark Kosdaq recently has been struggling with investors leaving the market. The Kosdaq has fallen more than 5 percent as of Friday, while the Kospi was up 5 percent compared to a year earlier.

The NPS said Thursday it will select 12 asset managers by Nov. 11.

Market insiders say NPS is increasing its investments on the secondary market is because it sees a possible upswing as small and midsize caps have reached the bottom.

“When compared to the second half of last year where the market was around 780, it has fallen 20 percent,” said Byun Joon-ho, an HMC Investment and Securities analyst. “Even when compared to overseas [stock markets] indices [the Kosdaq] can be seen reaching the bottom.”

The recent debacle of the Galaxy Note7 that has affected large caps including Samsung Electronics and Hyundai Motor is expected to have a favorable influence on the secondary market.

In the first nine months of this year, the value of large caps has risen 3.2 percent and small caps’ value increased 3.6 percent, according to Mirae Asset Daewoo. However, the value of midcap shares fell 4.6 percent during the same time.

“Up until now the midcap shares have struggled, but with the Galaxy Note7 crisis, we expect a turnaround [for midcaps],” said Yoo Myoung-gan, a Mirae Asset Daewoo analyst.

Currently the NPS invests in 260 stocks on both the primary and secondary markets. The NPS is planning to expand to 300 on the primary market and 700 in the Kosdaq.

At the end of July the accumulated pension fund was estimated at 541 trillion won and an estimated 95 trillion won or 18 percent is invested in the Korean stock markets.

BY KIM MIN-SANG, LEE HO-JEONG [lee.hojeong@joongang.co.kr]