Kim Orders Pension Funds to Increase HoldingsPresident Kim Dae-jung said Thursday that the government will expand investments by major pension and other funds in the stock market to 25 trillion won ($19.7 billion) over the next three years. Mr. Kim announced the market stimulus measure at a meeting with stock market officials.
"It is necessary for institutional investors such as pension and government funds to be pillars of a stable stock market, as is the case in advanced countries. We will greatly expand investment by major pension and funds, which is now about 10 percent [of their assets]," Mr. Kim said. Government pension funds and other funds such as the postal savings system invested 8 trillion won of their total assets of 75 trillion won last year for the first time.
The Korea Composite Stock Price Index reacted with a 15.38 point gain to close at 591.57. (Article, Page 5.)
Market analysts cautiously welcomed the news.
"If the funds are well-managed, they can boost the undervalued stock market," Ahn Jong-hyun, managing director of CJ Investment Trust Management said. He stressed that the funds must be managed without political interference.
The presidential secretary for economic affairs, Lee Ki-ho, said the government will invest the 25 trillion won over the next three years, starting with 6 to 7 trillion won this year.
Analysts said the move will protect Korean markets from sudden fund outflows by short-term speculative international investors by increasing the base of domestic investments.
Institutional investors in Seoul markets held 17 percent of total market capitalization as of last year, far short of the 50 percent portion of institutional investors in U.S. and British equity markets. Pension and other funds in the market amount to only 1 percent of market funds.
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