The artificially propped-up KOSPI 8000

"The Uncomfortable Truth About the National Pension System"

Cho Dong Geun

emeritus professor of economics,

Myongji University

<Table of Contents>

1. "KOSPI 8000" built up with debt investment and zero points

2. 'Irrational overheating' triggered by the Lee Jae-myung regime's designism

3. A Fatal Error in Dealing with the National Pension Serviceas a Stimulus of Stock Price

4. "Actual Operational Status" before 2026

5. National Pension Service as Hidden Helpers of Foreign Capital's Escape from Korea

1. "KOSPI 8000" built up with debt investment and zero points

On May 15, 2026, the KOSPI touched the 8,000 mark for the first time in the day. However, on the day the KOSPI surpassed 8,000 points, the stock index plunged 6.12 percent and a selling sideline was triggered. After that, the counter-trading of attempted transactions took place on May 18-20 at "305.1 billion won." Among them, "145.8 billion won" was counter-sold on May 20 alone. This is the largest number in 31 months since Oct. 24, 2023.

Counter-trading of attempted transactions means 'compulsory liquidation of the lower limit' due to lack of evidence. In general, counter-trading occurs between 10 and 30 billion per day. As of May 20, "five times the counter-trading" of the usual top occurred. Ants are virtually impossible to recover if they are counter-traded even once.

The outstanding amount of credit loans stood at 36.5675 trillion won on May 20, Yonhap reported, citing data from the Korea Financial Investment Association. "Securities company credit loan balance" refers to the amount that an investor has yet to pay back after borrowing money from a securities company to buy stocks. This is higher than the previous record high of 36.68 trillion won. It was around 20 trillion won a year ago.

On Jan. 2, the opening day of the stock market in 2026, the KOSPI closed at "4,309.63," up 2.27 percent from the previous trading day, setting a new record high based on the closing price. As of the opening day (1.2), the KOSPI almost doubled in just five months. This can only be seen as 'irrational overheating'. He brought revenge on the mayor.

2. 'Irrational overheating' triggered by the Lee Jae-myung regime's designism

The Lee Jae-myung administration has set "KOSPI 5000" as its direct policy goal. However, there is no case among major advanced countries that have set a specific stock index itself as an explicit policy goal like Korea. Therefore, the case of Korea is very unusual.

The official macro-policy goals of governments or central banks in advanced countries such as the United States, Japan, Germany, and the United Kingdom are "usually price stability, employment, growth rate, fiscal soundness, and financial stability." For example, the U.S. Fed's legal goal is "maximum employment, price stability, and adequate long-term interest rates," not the Dow or S&P 500 specific levels.

Japan's Abenomics is also a good comparative example. The Abe government "promoted to escape deflation through monetary easing, fiscal policy, and growth strategies," and the Bank of Japan proposed a 2% price target. The sharp rise in the Japanese stock market is only a "post-mortem result." The official policy goal is not a specific Nikkei index, but a "deflation escape and price target." The Japanese government presented three arrows as explanatory data for Abenomics: "bold financial policy, flexible fiscal policy, and growth strategy to promote private investment.“

Politicians often say during the election process, "We will raise the stock market and revitalize the stock market." President Trump of the United States also frequently mentioned the rise in stock prices as his achievement during his first term in office, and Japanese politicians also promoted the rise in the Nikkei as an Abenomics achievement. However, this is nothing more than explaining the expected effects of 'post-performance promotion or market-friendly policies'. A specific index cannot be the official national goal, such as "50,000 Dow" and "50,000 Nikkei".

Lee Jae-myung's "KOSPI 5000" is a rough policy goal with side effects in itself. The stock index is an "endogenous variable" that the government cannot directly control. Stock prices are driven by "corporate profits, interest rates, exchange rates, global economies, semiconductor cycles, foreign funds, geopolitical risks." What the government can do is to improve the institutional environment such as commercial law, tax system, accounting, disclosure, dividends, treasury stocks, and unfair trade regulations, not to target a specific index itself. Liberal philosopher F. Hayek likened it to a good harvest if "one sunshine and rainfall" are right. It is beyond human control that nature builds itself in farming.

Recently, the Korean stock market has been exposed to extreme volatility after hitting '8000'. The policy goal should not have been "KOSPI 5000," but "protecting shareholder rights, restoring confidence in the capital market," and "strengthening stock prices," but "creating a market structure that properly reflects corporate profits and shareholder returns.“

The policy is to create an "institutional environment that is good for businesses" so that stock prices rise. There is no country on Earth that uses a specific stock index as a policy goal.

If the stock price level is set as a goal first, it may be politically clear, but economic policy falls into the trap of "designism" that is bound by outcome indicators. In recent capital markets, individual investors' "young, debt investment" has become commonplace because the government acted as if it would take responsibility for the outcome to investors.

3. A Fatal Error in Dealing with the National Pension Service as a Stimulus of Stock Price

The National Pension Service sets the "target weight for each asset group" every year through the mid-term asset allocation plan and the annual fund management plan. Medium-term asset allocation is a five-year strategy that determines the weight of each asset group within the target rate of return and risk limit in consideration of "expected returns, risks, correlations between asset groups, and policy conditions."

The target share of domestic stocks of the 2026 National Pension Service, which was decided in 2025, was 14.4%, and the target share was raised once to 14.9% in January this year due to market volatility. However, as of the end of February 2026, the actual share of domestic stocks in the National Pension Service rose to 24.5%, significantly exceeding the target share. The Ministry of Health and Welfare diagnosed that the share of stock holdings in the asset composition has risen significantly due to the KOSPI market's hyperbole, and that if the share of stock holdings is lowered to the original target of 14.9%, that is, 'rebalancing', the KOSPI market could collapse due to a bomb on sales. However, This is a self-serving interpretation.

If the proportion of domestic stocks is higher than the target, it is normal to lower the proportion by selling domestic stocks. But the National Pension Service chose the opposite path. On May 28, 2026, the Fund Management Committee held a meeting to deliberate and decide on the "Medium-term asset allocation plan between 2027 and 2031, which determines the target weight for each asset group." As of the end of 2026, the Fund Management Committee voted for a target share of 20.8% of domestic stocks, 34.7% of foreign stocks, 23.1% of domestic bonds, 7.4% of foreign bonds, and 14.0% of alternative investment. The fund committee cites the argument for raising the target weight of domestic stocks as a structural change in the domestic stock market and avoidance of market shock caused by rebalancing due to the revision of the commercial law.

However, the proportion of domestic stocks in the National Pension Service (20.8%) is an absurdly large number. Since the National Pension Service is a long-term fund responsible for the pension income of the people, excessive exposure to "domestic economy, corporate performance, and policy risks" runs counter to the principle of diversified investment.

4. "Actual Operational Status" before 2026

At the end of 2024, domestic bonds accounted for the largest portion of the actual operation of the national pension, 344.3 trillion won (28.4%) and domestic stocks only 139.7 trillion won (11.5%). Overseas stocks were KRW 431.0 trillion (35.5%), overseas bonds were KRW 88.3 trillion (7.3%), and alternative investments were KRW 206.9 trillion (17.1%).

Until the adjustment in May 2026, the direction of asset management of the National Pension Service was to manage in the "reduction of domestic bonds →expansion of overseas stocks →expansion of alternative investment →expansion of domestic stocks in the 14-15% range." The National Pension Fund Management Headquarters has also described the direction of portfolio diversification as "reducing the proportion of domestic bonds and expanding overseas and alternative investments."

The National Pension Service's asset allocation was only 11.5% of domestic stocks until the end of 2024, before 2026. However, the proportion of domestic stocks increased significantly due to the surge in the domestic stock market between 2025 and 2026. The 20.8% of domestic stocks are not a normal target, but rather a "realization weight" that recognizes the situation where the actual share exceeds 20%.

The post-adjustment of the target was made because sticking to the previous 14.9% target with the share of domestic stocks rising to 24.5% at the end of February 2026 could result in a massive sell-off and market shock. In other words, 20.8% of the economic logic is not because it is an optimal asset allocation, but a policy adjustment to prevent market shock.

5. National Pension Service as Hidden Helpers of Foreign Capital's Escape from Korea

There is an "inconvenient truth" hidden in the National Pension Service's obsession with 20.8% of domestic stocks. The national pension fund reserve for 2026 is '1,610.4 trillion won'. In addition, considering the 24.5% share of domestic stocks as of February 2026, the National Pension Service can hold shares worth 395 trillion won (1,610.4 trillion won ×0.245 = 394.5 trillion won). As such, the KOSPI and KOSDAQ indexes will be able to rise high.

Of course, the National Pension Service can hold shares of Korean companies. However, this should be a decision at the best asset management level, not for the political purpose of stimulating the capital market. As the National Pension Service functions as a "big hand" in the capital market. The National Pension Service is helping foreign capital escape Korea after realizing profits. Foreigners have been selling Korean water for 20 consecutive days and leaving Korea. They expect the National Pension Service to accept the "Korean water" they threw. As of June 8, the KOSPI index had collapsed to the mid 7,000s. The "Youngchil, Debt Investment" ants, who got on the artificially boosted KOSPI market late, are losing their principal. They are practically screaming in a trap dug by the government.

This article may differ from the views of the Hansun Foundation

(※ It's a translation based on machine translation)