Social and public funds that had avoided small- and mid-cap stocks in the past months renewed purchase of smaller stocks this month after South Korea’s largest institutional investor National Pension Service (NPS) decided to add more non-large-cap stocks to their investment portfolio.

Their revived appetite for small- and mid-cap stocks is expected to buoy the county’s secondary Korea securities Dealers automated Quotation (Kosdaq) that has remained bearish since June when NPS started to dump about 300 billion won ($260 million) worth of small- and mid-cap stocks.

According to Korea Exchange (KRX) Tuesday, social and public funds have net purchased about 9 billion won worth of Kosdaq-listed shares in the first six trading sessions of November ended Tuesday, snapping their selling spree of small- and mid-cap stocks that has lasted in the past five months. Their renewed buying of smaller stocks came after NPS last month announced it would pick additional asset management firms to invest 1 trillion won in small- and mid-cap stocks, value stocks and active quant fund this month.

NPS chief investment officer Kang Myun-wook said NPS’s sell-offs of small- or mid-cap stocks recently ended after its stock investment reallocation process to up large-cap stocks that started in April was completed. He added that during the April-October period, the NPS sold 300 billion won worth small- and mid-cap stocks listed in the Kosdaq market, much less than about 1 trillion won worth of Kosdaq-listed stocks that were net sold by institutional investors during the same time.

The NPS currently assigns outside asset managers to directly invest 46 trillion won out of 100 trillion won investment allocated to local stocks. In April, it asked asset managers to up investment of benchmark index funds mainly composed of blue chip stocks and further increase the allocation of index funds to more than 50 percent in its portfolio in June. Since then, NPS had been blamed to have triggered sell-offs in non-large-cap stocks as other social and public funds also shifted away from smaller stocks, following suit of the world’s third largest pension fund with asset of about 520 trillion won.

On Friday, NPS will pick three asset management firms that will manage 1 trillion won to invest in small- and mid-cap stocks, value stocks and active quant fund this month, Kang said. The pension fund is also mulling additional 1 trillion won worth investment in December, he added.

The Kosdaq index has risen for four consecutive days until Tuesday. On Wednesday, the Kosdaq closed at 601.33, down 3.7 percent from the previous day, following the surprise victory of Donald Trump in the U.S. presidential election.

By Han Ye-kyung and Choi Jae-won

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