The sudden imposition of martial law at the end of the year has sent shockwaves through the domestic stock market, raising alarms in the Yeouido asset management industry. Normally, this would be the time to close the books and take vacations or prepare for next year's business plans, but this year, reports suggest they cannot afford to take time off due to low revenue.
According to the Korea Financial Investment Association on the 17th, of the 3,341 domestic equity funds, 2,706 had recorded negative (-) revenue this month. This represents about 81.0% of the total. When narrowing the period to the recent three months, funds that are yielding no revenue reach 92.6% (3,094).
This appears to be due to the domestic stock market recording the lowest revenue among major countries worldwide this year. The Korea Composite Stock Price Index hit a record low of 2,360 on the 9th. This is an 18.51% decline compared to the peak of 2,896 in July. Fortunately, it has shown a recent recovery, approaching levels prior to the martial law, but it is still 4.55% lower than at the beginning of the year.
Consequently, small and medium-sized houses managing major institutional assets, such as pension funds, are expressing concerns about their performance this year. A representative from one asset management company noted, "We need to return some revenue to investors, but the market conditions are poor, which is concerning," adding, "With political uncertainty, soaring won-dollar exchange rates, and tariff risks stemming from Trump, there seems to be no chance for a year-end celebration, and we'll have to remain vigilant until short selling resumes in March next year."
Even looking at the revenue rate of the National Pension Service, a significant player in the domestic stock market, indicates seriousness. The National Pension has seen a sharp decline in revenue this second half as stock prices of large-cap companies, including Samsung Electronics, have fallen. As of the end of September, domestic stock investments constitute about 12.7% of the National Pension's overall portfolio.
As of the end of September, the provisional revenue rate by asset type for the National Pension is merely 0.5% for domestic stocks. In comparison, it is 21.4% for overseas stocks, 7.0% for overseas bonds, 5.1% for alternative investments, and 4.1% for domestic bonds. Given that the Korea Composite Stock Price Index has dropped nearly 6% since the end of September, it is estimated that recent performance has not improved.
In particular, the stock price of Samsung Electronics, which is the most held asset in the domestic stock portfolio, has plummeted by 28.5% as of the 13th compared to the beginning of the year. As of the end of last year, Samsung Electronics accounted for 23.3% of the National Pension's domestic stock portfolio. Since August 16, 2022, the National Pension has maintained a 7.7% stake without any changes.
The situation is similar for other pension funds and retirement associations. The public officials pension fund, managing 7 trillion won, has a stock proportion of about 26.8%. The private school teachers' pension fund and the teachers' retirement association also face performance downturns with stock proportions of 16% and 7.7%, respectively, due to the malaise in the domestic stock market.
Some predict that the domestic stock market will stabilize following the approval of the impeachment motion against President Yoon Suk-yeol, but there is no indication of a rapid rebound, leading the asset management industry to remain on high alert. As foreign investors continue to exit the domestic stock market for the fourth month, opinions suggest there are limits to expecting sharp index increases.
A representative from an asset management company said, "I thought we would be closing the books and had planned vacations around this time, but I canceled those plans," adding, "Half of the asset management firms in Yeouido are in the red, so I essentially think there won’t be any book closings this year."