Summary

  • The Kospi plunged in the 8% range, breaking below the 5,000 mark and triggering a circuit breaker.
  • Lawmaker Han Dong-hoon said the Lee Jae-myung administration increased its domestic equity weighting during the semiconductor rally and went all in on Samsung Electronics and SK Hynix.
  • Han said that as a result, $131.9 billion vanished from the National Pension Service in just three and a half months, calling it a speculative bet backed by the public's retirement savings.

Forecast Trend Report by Period

The price of turning retirees’ savings into a speculative bet

Kospi plunges more than 8% after the open, triggering a circuit breaker

Han says government praised itself during a semiconductor rally and failed to prepare for a downturn

Independent lawmaker Han Dong-hoon sharply criticized the Lee Jae-myung administration after the Kospi plunged more than 8% shortly after the open on November 5, falling below the 5,000 mark for the first time in 10 months. The government had touted a stronger stock market as one of its economic achievements.

Han wrote on Facebook on November 5 that "Kospi 5000 has just collapsed," adding that the Nasdaq fell 5.5% overnight and the Philadelphia Semiconductor Index dropped more than 12%.

"Kospi 5000 is a number the Lee Jae-myung government put forward as a state policy goal," he wrote. "A number reached and then not defended is worse than a number never reached," he added, saying it reflected the people's blood, sweat and tears.

Han said he had warned in March that the market's rise was being driven by the semiconductor cycle and that the government should prepare for a downturn instead of congratulating itself. It did not, he said.

He also accused the administration of leaving National Pension Service stock holdings untouched while share prices were rising, when it should have reduced them. It also increased the fund's weighting in domestic equities and concentrated holdings in Samsung Electronics and SK Hynix, he said. As a result, 182 trillion won, or $131.9 billion, was wiped out in three and a half months.

Han said that figure was calculated before this week's plunge. He called on the president to directly disclose the current state of the National Pension Service, saying the public was now seeing the price of using retirement savings as collateral for a speculative bet.

According to the Korea Exchange, the Kospi tumbled immediately after the open on November 5. A circuit breaker was triggered on the benchmark KOSPI market at 9:03:33 a.m. Under the rule, trading is halted for 20 minutes if the index remains down 8% or more from the previous session's close for one minute.

Just before the circuit breaker was triggered, the Kospi was down 460.33 points at 4,923.47.

Kim Hee-seon, Hankyung.com reporter [email protected]

Korea Economic Daily