Ministry of Health and Welfare Work Report Presided Over by President Lee on the 16th
On December 16, President Lee Jaemyung discussed the management of the National Pension Fund during a Ministry of Health and Welfare work report, stating, "Recently, there have been reports that the domestic stock market's rise has increased the fund by 150 trillion to 200 trillion won, pushing back the depletion year by two or three decades." He addressed the impact of rising stock prices on pension fund projections and the fund's domestic equity holding strategy. In response, the National Pension Service announced that it would adjust its investment guidelines for domestic equities by considering both long-term returns and market conditions.
At the work report held at the Sejong Convention Center by the Ministry of Health and Welfare (Korea Disease Control and Prevention Agency) and the Ministry of Food and Drug Safety, President Lee raised the need for 'structural reform' as a follow-up to pension reform. While discussing the increase in the fund due to stock price gains and the 'depletion point,' he remarked, "Since the legislation on pension premiums and the income replacement rate has been completed," and emphasized, "We need to pursue structural reform."
When President Lee asked, "Isn't it true that more than 150 trillion won was gained just in the second half of this year due to the revitalization of the stock market?" Kim Sungjoo, Chairman of the National Pension Service, replied, "Although these are valuation gains, the current profit exceeds 200 trillion won." President Lee responded, "Then the National Pension Service has greatly benefited from the stock market rise, and so have the people." Minister of Health and Welfare Chung Eunkyung added, "The rate of increase in domestic stocks is being evaluated as the highest."
President Lee inquired about the National Pension Service's domestic equity holding limit, asking, "I've heard that the limit was exceeded because of the stock market's rise." Chairman Kim explained, "The target allocation is 14.9%, but due to the higher valuation, it has been fluctuating between 15% and 16%," adding, "However, we have not yet reached the upper limit."
President Lee then asked about the possibility of increasing the proportion of domestic stocks. An official from the National Pension Service responded, "If you look at the difference in returns between domestic and overseas stocks over the past ten years, overseas equities have overwhelmingly outperformed," and added, "It is impossible to predict whether the domestic stock market will continue to perform well next year." The official continued, "We are planning to revise our investment guidelines and standards to respond quickly to changing conditions," and stated, "If we hold a fund management committee meeting next year, it should be possible."
President Lee stated, "It is clear that the Korean stock market is undervalued. For more than a decade, while other countries' markets have risen, only ours has trended downward." He added, "There has been a long-standing perception that this is due to governance issues and an underdeveloped market structure." President Lee concluded, "I believe that the strong performance of the domestic stock market this year, compared to other countries, reflects expectations for amendments to the Commercial Act and improvements in corporate governance."
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