[Editorial] The Stock Market Needs Policy, the NPS Needs Principles

The National Pension Service (NPS) began its domestic stock portfolio rebalancing yesterday (July 1). In response to widespread speculation about a "massive sell-off," the National Pension Service dismissed such rumors as "groundless" and took steps to reassure the market. As a result, the stock market closed without significant shocks. However, beyond the short-term fluctuations in stock prices, the more fundamental issue to watch is the boundary between the investment principles of the National Pension Service and capital market policy. If the market begins to perceive the NPS as a policy tool of the government, trust in the NPS's asset management principles and the market's predictability will inevitably be undermined.

The government has promoted stock market revitalization through capital market advancement and policies to enhance corporate value. As stock prices soared, the NPS's domestic equity allocation exceeded its target. In response, the authorities raised the domestic stock allocation target and postponed rebalancing until the end of June. While these actions were unavoidable measures to minimize market impact, they ultimately left the impression that, when the NPS's asset allocation principles and government policy collide, policy priorities take precedence. This perception has lingered in the market.

The National Pension Service is an institution that manages the retirement assets of the public from a long-term perspective, while the government is the policy body driving stock market revitalization. If the market begins to accept that the NPS's asset allocation principles can be adjusted for policy needs, NPS trading may be interpreted not as investment decisions but as policy signals. Of course, the government's initiatives to boost the stock market should proceed unimpeded. However, the means to achieve this should be systemic improvements such as enhancing corporate value, adjusting tax policy, and regulatory reforms. The NPS is not a market stabilization fund propping up the stock market, but a long-term investment institution managing the public's retirement assets. The line between policy objectives and asset management principles must be clear.

The starting point for resolving this controversy is to enhance the transparency and predictability of the NPS's investment principles. While it is unnecessary for the NPS to disclose every individual trading strategy, it should clearly present the standards, procedures, and principles for exceptions regarding rebalancing in a way that the market can accept. Only then can needless rumors of a "massive sell-off" and debates over policy intervention be avoided. The government should grow the market through policy, and the NPS should manage assets according to principle. When this boundary is clear, both market trust and the independence of the NPS can be preserved.

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