Oh Se-hoon Faults 20.8% Pension Target After KOSPI Plunge

Questions Oh Se-hoon’s Criticism Raises for the Market

Seoul Mayor Oh Se-hoon on the 8th criticized the expansion of the National Pension Service’s target allocation to domestic equities and the approval of high-risk leveraged products, calling for a direct apology from President Lee Jae-myung and measures to address losses suffered by retail investors. For investors reviewing the issue reported by Yonhap News Securities, the priority is not the political dispute but the policy decisions and risk-exposure structure surrounding the sharp drop (plunge).

On the 6th, the KOSPI fell below 5,000 shortly after the market opened, triggering a circuit breaker. This points to more than a one-off decline in the index. It means the debate has shifted toward scrutinizing the rationale behind the National Pension Service’s equity allocation adjustment and the approval of leveraged products linked to Samsung Electronics and SK hynix.

National Pension Service Allocation Rises From 14.9% to 20.8%

Oh criticized the increase in the National Pension Service’s target allocation to domestic equities from 14.9% to 20.8% six days before the local elections. The target allocation is the investment guideline determining how much the pension fund may hold in domestic equities. The market has confirmed that the allocation was changed, but it remains unclear who made the decision and what specific rationale supported it.

The higher allocation expands the scope for the National Pension Service to invest in domestic equities. Its actual market impact cannot be determined from the target allocation alone because the available information does not include specific trading records or execution dates. It would therefore go beyond the evidence to immediately establish a causal relationship between the target change and the KOSPI’s sharp drop (plunge).

Risk Structure of 2x Samsung Electronics and SK hynix Products

On May 27, authorities approved the launch of products designed to deliver twice the daily price change rate of Samsung Electronics and SK hynix shares. In this case, a high-risk leveraged product means one designed to track two times the companies’ daily share-price movements. The central issue is that the structure magnifies downside moves as well as gains.

Oh questioned the speed and circumstances of the policy, noting that the product launch was approved seven days before the local elections. Because the issue concerns the product structure and approval process—not the earnings of Samsung Electronics or SK hynix—it would be premature to change an investment view on either stock based on a single political statement. However, if volatility persists, the risk exposure of products that amplify daily price changes will become more pronounced.

Why the KOSPI Plunge and Policy Accountability Should Be Separated

Oh claimed, “The government used the National Pension Service as seed money to expand the game and opened the door to raising the stakes with high-risk leveraged products.” Pointing to the overlap between the timing of the policy decisions and the local elections, he also asked, “Was all of this really a coincidence?” Both statements reflect Oh’s political judgment and do not mean that the cause of the stock market plunge has been established.

President Lee Jae-myung’s statement that “asset-building should flow not into real estate but into the stock market and capital markets” was also cited as grounds for criticism. However, the available information does not support linking that statement, the expansion of the National Pension Service’s target allocation, the approval of leveraged products and the KOSPI decline into a single causal chain. The specific scale of losses suffered by retail investors has also not been confirmed.

What Samsung Electronics and SK hynix Investors Should Distinguish

• Samsung Electronics: The confirmed direct link is a product designed to track twice the stock’s daily price change rate. The available information provides no evidence that this controversy has affected Samsung Electronics’ business or earnings.
• SK hynix: As an underlying asset for the same type of leveraged product, it is linked to product risks during periods of heightened volatility. Changes in the company’s underlying value should be distinguished from price movements amplified within the product.
• National Pension Service: The decision-maker and rationale behind raising the target allocation to domestic equities from 14.9% to 20.8% have become matters for public disclosure. The actual market impact can be assessed only after the execution process—not merely the target—is confirmed.
• KOSPI: It has been confirmed that the index fell below 5,000 shortly after the market opened on the 6th, triggering a circuit breaker. The cause of the sharp drop (plunge) was not provided in the available information.

Policy and Market Developments to Watch Next

• Investors should determine who decided to expand the National Pension Service’s target allocation to domestic equities and what rationale was applied.
• Investors should watch whether authorities disclose who spearheaded the launch of the high-risk leveraged products and why the approval process was accelerated.
• The response to demands for a direct apology from President Lee Jae-myung and measures addressing retail investor losses will be the next policy variable.
• Investors must distinguish between movements in Samsung Electronics and SK hynix shares and the risks of products that track twice their daily price change rate.

The Scope of Disclosure Will Shape Market Judgment

In an optimistic scenario, disclosure of the decision-makers, rationale and product approval process would reduce policy uncertainty. Conversely, if explanations remain insufficient, debate over the National Pension Service’s asset management and the oversight of high-risk products will continue. Neither scenario provides a basis for determining the KOSPI’s direction.

The decisive factor in these scenarios is not another price forecast but the disclosure of verifiable information. Until the National Pension Service’s rationale and the leveraged-product approval process are confirmed, neither a causal relationship between the policies and the local elections nor responsibility for the stock market plunge can be established.

This article was automatically summarized and analyzed from the original news report. View original article (Yonhap News Securities)