In December last year, when the won-dollar exchange rate hovered above 1,470 won, the general government, including the National Pension Service and public pensions, instead bought more overseas stocks. This contrasts with individual investors, known as "Seohak Les Fourmis," who reduced their overseas stock investments during the same period.
According to the Bank of Korea (BOK) on the 8th, the general government's overseas stock investment in December last year totaled $4,085.8 million. That was up 2.8% from the previous month ($3,975.4 million). In contrast, overseas stock investment by "nonfinancial corporations, etc." plunged 61.9% to $2,011.5 million from the previous month ($5,270.3 million).
According to the BOK, in balance of payments statistics, the National Pension Service accounts for the largest share of the general government. In addition, the Korea Investment Corporation (KIC) and various public pensions such as the public officials, military, and private school pensions are included. "Nonfinancial corporations, etc." are generally regarded as individual investors.
Some suggested that the National Pension Service may have actually increased the scale of its overseas stock investment in December last year, when the won-dollar exchange rate surged. In response, the Ministry of Health and Welfare said, "The National Pension Service's overseas investment in December decreased compared to the previous month." The specific monthly investment size of the National Pension Service is not disclosed. Since the total investment of the general government in December increased by about 1 billion won compared with November last year, even if the National Pension Service's overseas stock investment decreased, the drop was likely not large. Instead, it appears that KIC or other pension funds increased their overseas investments.
As a result, in November last year, Seohak Les Fourmis' overseas stock investment was 1.5 times that of the general government, but in December the general government was more than double that of Seohak Les Fourmis. The share of the general government in total domestic residents' overseas stock investment also rose from 31.7% in November last year to 34.5% in December.
Meanwhile, the foreign exchange authorities have continued to signal concern that the National Pension Service's overseas stock investments are fanning the rise in the exchange rate. Based on this concern, the Ministry of Economy and Finance, the Ministry of Health and Welfare, and the National Pension Service formed the "New Framework" in November last year and are discussing an appropriate level of currency hedging and dollar funding measures so that the National Pension Service's investment activities do not cause excessive volatility in the exchange rate.
On the other hand, the position is that the increase in the National Pension Service's overseas investments is not a major cause of the exchange rate's rise. Kim Sung-joo, chair of the National Pension Service, said in an interview with a media outlet earlier this month, "The rise in the exchange rate is the result of a complex interplay of various internal and external factors, and it cannot be seen that the increase in the fund's overseas investments is a (major) cause," adding, "We will maintain the policy of expanding overseas investments to improve long-term returns."
Last month, the National Pension Service Fund Management Committee decided to adjust its portfolio by raising the allocation to domestic stocks from 14.4% to 14.9% and slightly lowering the allocation to overseas stocks from 38.9% to 37.2%. The committee also decided to temporarily defer "rebalancing," which adjusts asset class weights to keep them within allowed ranges when they deviate from targets.