Korean pension funds including the National Pension Service net bought 279.3 billion won worth of Korean stocks in the KOSPI market over the past three consecutive weeks, according to Yonhap Infomax trading data. The net buying follows a 10-week net selling streak that ended in early July, marking the first net buying activity in approximately two months. The shift occurred as KOSPI rapidly corrected from the 9,100 level to 6,500 by the end of July, bringing the forward price-to-earnings ratio down to 5.4 times. Despite the improved valuation, pension funds remain cautious as their domestic stock holdings still exceed benchmark weights under strategic asset allocation frameworks.
Pension Funds' Limited Net Buying Compared to Previous Selling Scale
The recent net buying scale remains modest compared to the preceding selling activity. Pension funds' weekly average net buying totaled 93.1 billion won over the three-week period. From the last week of April to the first week of July, pension funds net sold a total of 4.8816 trillion won worth of KOSPI stocks, with a weekly average net selling volume of 488.2 billion won during that period.
KOSPI Valuation Reaches Attractive Levels as P/E Drops to 5.4x
KOSPI has entered a price range considered attractive based on valuation metrics. By the end of July, the index gave back all gains from May and June, falling to the 6,500 level. The KOSPI forward price-to-earnings ratio declined to 5.4 times, increasing entry appeal from a valuation perspective.
![Korean pension funds trading activity chart]()
Chart showing pension fund trading patterns in KOSPI market
CIOs Explain Cautious Stance Due to Overweight Positions
Major pension fund chief investment officers confirmed their institutions remain in a wait-and-see mode despite improved valuations. A CIO from one of Korea's three largest pension funds stated, "We are technically doing only stock-by-stock rebalancing without buying or selling much. Our domestic stock holdings ratio still remains higher than strategic asset allocation." The CIO added, "When combining overseas stocks, our equity weight is still overweight compared to bonds or alternative assets. Since equity returns are already at about 90% year-to-date, executing funds toward bonds or alternative assets that have risen less is a more important task aligned with our asset allocation plan."
Another CIO from a top-three Korean pension fund explained, "While a P/E of 5 times indicates prices have fallen to an attractive range, pension funds don't just look at price but at our positions. If we were far from benchmark weight, it might be okay to enter, but since we haven't deviated from target positions, it's a level to watch."
Market Volatility Prompts Wait-and-See Approach Among Fund Managers
A CIO from one of Korea's seven major mutual aid associations stated, "We have done almost no trading in the past 1-2 weeks. Although it has risen and fallen significantly, we judged it's not time to sell now, but volatility is too high to buy, so we are observing." An official familiar with pension fund operations noted, "If ground war between the US and Iran breaks out, KOSPI could fall to the 4,000 level during trading sessions. The National Pension Service might adjust its domestic stock weight or allowable range once more. Now is absolutely not a situation to enter further."
FAQ
How much did Korean pension funds net buy in KOSPI stocks over the past three weeks?
Korean pension funds net bought a total of 279.3 billion won worth of KOSPI stocks over three consecutive weeks, with a weekly average net buying volume of 93.1 billion won.
Why are pension funds cautious despite KOSPI's valuation dropping to 5.4x P/E?
Pension funds remain cautious because their domestic stock holdings still exceed benchmark weights under strategic asset allocation frameworks. CIOs stated that equity positions including overseas stocks remain overweight compared to bonds and alternative assets, making further stock purchases inconsistent with current asset allocation targets.
