South Korean President Lee Jae Myung Advocates for Increased Domestic Stock Investment by Pension Funds
South Korean President Lee Jae Myung has raised concerns about the investment strategies of domestic pension funds, emphasizing the need for a stronger focus on domestic stocks amidst rising overseas investments. During a press conference on his 100th day in office, he highlighted the potential missed opportunities for substantial gains in the Korean stock market.
Current Landscape of Pension Fund Investments
Lee’s remarks came on the heels of a significant milestone, as the Korean benchmark stock index recently reached an all-time high of 3,314.53 points on September 10, 2025. Notably, he observed that domestic stocks make up only 14.9% of the National Pension Service’s portfolio, while overseas stocks account for 35.2% as of June 30, 2024.
Criticism of Pension Fund Strategies
During the press conference, Lee expressed skepticism about the rationale provided by pension funds for their investment strategies. “I find their explanations unconvincing,” he stated, calling for a reassessment of their investment priorities. He challenged the notion that potential future expenditures from pension funds, due to Korea’s low birth rate, would necessitate a reduction in domestic equity investments.
“If the (Korean) stock market is higher in 30 years and we don’t hold shares, wouldn’t it be a missed opportunity?” Lee queried, urging the funds to reconsider their approach.
Addressing the ‘Korea Discount’
Lee underscored his commitment to restoring investor confidence in the domestic stock market to combat what is known as the “Korea Discount.” He acknowledged that the persistent undervaluation of Korean stocks is largely attributed to a lack of trust among investors.
Vision for Future Stock Market Growth
The President has ambitious plans to drive the Kospi index toward the 5,000-point milestone, an achievement never before realized in Korea. He emphasized a potential shift in equity tax policies, particularly regarding large shareholders.
Changes in Capital Gains Tax
In a significant move, the government and ruling Democratic Party recently agreed to lower the capital gains tax threshold for large shareholders. The threshold will decrease from 5 billion won ($720 million) to 1 billion won in holdings within a single listed company, thus reinstating standards from 2022. This adjustment means that large shareholders would face a tax rate of 22-27.5%, the highest among shareholders.
“If the threshold becomes an obstacle to market revitalization, there is no need to stick to it,” Lee remarked, indicating a willingness to adapt regulations to foster a more robust market environment.
The Role of Major Pension Funds in Market Dynamics
The National Pension Service (NPS), as one of the world’s largest pension funds with 1,300 trillion won ($930 billion) in assets under management, has significant sway in domestic markets. Its influence raises concerns among investors, especially as it becomes a major shareholder in various companies, often holding the swing vote in proxy battles.
Conclusion: The Path Forward
As President Lee Jae Myung advocates for a recalibration of domestic pension fund investments, the market watches closely. With the Kospi index reaching new heights, the emphasis on fostering confidence among investors and revising tax regulations could be pivotal in shaping the future of the Korean stock market.
For further details or inquiries, you can reach out to Hyung-Kyu Kim and Sang-Won Jeong at khk@hankyung.com.
By focusing on domestic stocks and adjusting tax policies, President Lee aims not only to enhance investor confidence but also to harness the full potential of Korean market dynamics for future growth.
