The National Pension Service is planning to inject 1 trillion won ($880 million) into South Korea’s financial market within this month, according to the pension fund operator Thursday.

The NPS is eyeing domestic value stocks, active quant funds and mid and small-cap stocks for the investment. 


The move is expected to help boost the flagging Kosdaq and add momentum to the overall securities markets that have recently been tumbling over unfavorable events at home and abroad.

The country’s biggest institutional investor has been focused mostly on large-caps based on the principle that it should invest in companies with over 100 billion won in market capitalization, over 30 billion won in annual sales and over 500 million won in daily stock transactions.

The institution ditched the principle in October to diversify their investments, as the organization seeks to improve its earnings rate and ease its excessive influence on the domestic financial market.

The fund operator’s investment committee will decide on 12 asset management companies to commission the 1 trillion won worth of investments by the end of next week.

Market observers forecast that NPS could start investing as early as Nov. 14 and complete the investments within the month.

“We can’t reveal the exact timing and amount of investments,” said a spokeswoman at NPS. “For sure, the total amount will be executed within the year.”

NPS currently has 100 trillion won invested in domestic equities.

By the end of the year, the pension fund could add another 20 trillion won to the local securities markets, financial industry watchers said.

However, the NPS spokeswoman dismissed the market speculation, calling it “unconfirmed” considering current market situations.

The additional investments by NPS would give more room for the local stock markets in terms of liquidity, analysts say.

“Although the NPS funds wouldn’t have much impact on the overall index figure, they will help bolster future rallies of small-caps,” said Lee sang-jae, research head at Eugene Investment & Securities.

“Overall, the timing of the investment executions will be critical,” Lee added. “If the investments are executed within one month, and there is no significant external shock to the market, the effectiveness of the NPS investment would be greater than expected.”

Such news is also welcomed by local investors experiencing high uncertainties amid the ongoing presidential scandal as well as those stemming from the unpredictable result of the US presidential election and Federal Reserve’s rate movements in the near future.

Seoul’s main bourse Kospi closed below the 2,000 mark for two days in a row as investor sentiment was constrained by substantial volatility in the market as the three issues have rapidly developed. The Kospi even plunged below 1,980 during day trading Wednesday.

The county’s tech-heavy Kosdaq slid more than 3 percent on Wednesday.

The Kospi opened higher Thursday as investors were reassured about a signal from the US Federal Reserve that kept interest rates unchanged Wednesday, suggesting a looming rate increase in December as many anticipate.

However, the index continued to go through ups and downs during the day as the Choi Soon-sil scandal spilled over to major businesses.

Samsung Electronics lost 1.64 percent in its stock value Thursday, a day after prosecutors announced they were looking into allegations the tech giant handed some 3.5 billion won to Choi via a paper company jointly established by the president’s confidante and her daughter Chung Yoo-ra.

CJ Group shares were seen falling for five days until early Thursday after some media reports revealed the group had been involved in various cultural projects planned by Cha Eun-taek, a director and close acquaintance of Choi.

By Song Su-hyun (song@heraldcorp.com)