Minister Park Neung-hoo: "We Will Respond Flexibly to Rapid Changes in Financial Markets Due to COVID-19" (Comprehensive)

Crisis Response Through Four Domestic and Overseas Stock Purchases Last Month
Expected to Actively Serve as a Stock Market Safety Net Amid Rapid Financial Market Changes
Plans to Expand Overseas Assets and Alternative Investments Share with Economic Recovery in the Second Half

[Asia Economy Reporter Minji Lee] The National Pension Fund Management Committee (hereinafter referred to as the Fund Committee) announced that it will respond flexibly to the rapid changes in the financial market caused by the spread of the novel coronavirus infection (COVID-19). It also hinted at the possibility of purchasing more domestic stocks if volatility increases further.

Minister of Health and Welfare Park Neung-hoo is delivering opening remarks at the '4th National Pension Fund Management Committee' held on the 17th at the Plaza Hotel in Jung-gu, Seoul. Photo by Kang Jin-hyung aymsdream@

On the morning of the 17th, Park Neung-hoo, Minister of Health and Welfare, said at the 4th National Pension Fund Committee held at The Plaza Hotel in Jung-gu, Seoul, “The real economy is shrinking and financial market volatility is increasing due to the inflow of COVID-19,” adding, “Since it is difficult to accurately forecast the current economic situation, we will respond flexibly to financial market fluctuations.”

The Ministry of Health and Welfare and the National Pension Fund Management Headquarters have been operating a crisis response task force (TF) since the spread of COVID-19 to cope with rapid changes in the financial market. As asset prices plummeted due to stock price declines, they changed the fund management plan four times in March, considering target proportions, and additionally purchased domestic and overseas stocks.

They are also responding by expanding Market Average Rate (MAR) transactions and dispersing transaction days to ensure that dollar procurement for overseas investment does not affect the domestic foreign exchange market.

Minister Park Neung-hoo explained, “This is to stably increase long-term returns as a long-term investor,” and added, “If the economy gradually recovers in the second half of this year, we will maintain the basic direction by reducing the proportion of domestic assets and expanding overseas assets and alternative investments.”

However, if the economic downturn continues until next year, they plan to purchase undervalued high-quality risk assets through overseas bond liquidity. The Fund Committee is preparing various scenarios according to market conditions amid growing concerns about the prolonged COVID-19 situation.

In the short term, if the market changes rapidly, they plan to actively play a safety net role in the stock market. Minister Park said, “The Fund Committee should prioritize stability and profitability, but the stability of the capital market is also an important policy consideration,” and added, “If it can contribute to stabilizing the stock market by purchasing domestic stocks under the asset allocation principle, we will do so.”

Additionally, the Fund Committee discussed the medium-term asset allocation for 2021?2025. However, since specific indicators such as global and domestic economic growth rates have not yet been announced, the discussion mainly consisted of interim reports on the progress. The final asset allocation plan will be decided at the next Fund Committee meeting.

The interim report covered topics such as improvements in the calculation method for expected returns on alternative investments, the appropriateness of the current currency hedge policy, and preemptive measures against financial market overheating. In particular, to reduce portfolio volatility, the currency hedge ratio for overseas investment assets was set at 0%, and for overseas bonds only, cross-currency exposure will be 100% hedged to the US dollar.

Meanwhile, three full-time expert members of the National Pension Fund Professional Committee, appointed on February 24, participated in the Fund Committee meeting. Newly appointed members recommended by the Korean Confederation of Trade Unions, the Federation of Public Trade Unions, and the Korea Employers Federation also attended.

Finally, Minister Park emphasized, “We will actively facilitate communication in the full-time expert committee so that they can play an active role,” and added, “Regarding the rapidly changing economic situation, we will hold meetings not once a month but weekly to respond flexibly.”

This content was produced with the assistance of AI translation services.