Korea's Largest Pension Fund Suffers Over $130 Billion Loss Due to Heavy Investment in Samsung and SK Hynix

As of October 15, the total valuation of shares held by the National Pension Service (NPS) of South Korea, which owns 5% or more of 287 listed companies, has shrunk from 515.93 trillion won at the end of June to 333.53 trillion won, resulting in a paper loss of approximately 182 trillion won, equivalent to about $137 billion.

The loss is primarily related to the fund's heavy investments in Samsung Electronics and SK Hynix. The market value of SK Hynix held by the NPS has evaporated by about 74.2 trillion won, while the market value of Samsung Electronics has decreased by 56.9 trillion won, with the two stocks accounting for approximately 72% of the total decline in portfolio value.

NPS is the largest pension fund in South Korea, managing assets worth 1866 trillion won, approximately $1.35 trillion, as of the end of June. The investment return rate for the first half of this year reached 27.2%, marking the best performance for the same period since 2022. However, the market reversed within months, marking the first quarterly decline in its core holdings since the fourth quarter of 2024.

NPS has consistently ranked Samsung Electronics and SK Hynix as its top two domestic stock holdings, maintaining a stake of over 7%. In May of this year, the fund's operating committee raised the year-end target allocation for Korean stocks. After reaching a peak in June, stock prices quickly corrected, and by mid-October, SK Hynix had fallen over 50% from its high, while Samsung Electronics had retreated by about 40%.

Foreign investors' concentrated selling has been a direct driver of the decline, with the two companies accounting for nearly 80% of the total net sales by foreign investors. Market divergences regarding AI storage demand, advancements in Chinese storage technology, and the high volatility of individual leveraged ETFs have also amplified the declines. The KOSPI index in South Korea reached a historical closing high of 9114.55 points on June 22, but had fallen by about 39% as of October 15. During this period, the NPS's stake in SK Hynix decreased from 7.5% to 7.32%, while its stake in Samsung Electronics remained at 7.84%.

On October 16, a report from Bank of America suggested that the valuation of storage stocks may have bottomed out after approximately three and a half months of adjustments, with storage chip prices and profits expected to remain high through 2027 to 2028. However, some analysts warned that if global AI companies cut capital expenditures, there could still be downward adjustments in the profit expectations for the two companies. As of now, NPS has not made a formal response regarding the significant decline in the value of its holdings.

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