(EDITORIAL from Korea JoongAng Daily on Oct. 16)

On Thursday, the Korea Kospi plunged 7.57 percent, falling below the 5,600-point mark. The decline prompted circuit breakers to temporarily halt trading in both the Kospi and Kosdaq markets, the first simultaneous activation since July 29. This steep drop followed renewed speculation about additional U.S. interest rate hikes and concerns about AI investment peaking.

Major Asian markets, including Japan and Taiwan, also experienced significant losses. However, Korea's decline was particularly severe, largely attributed to the country's heavy reliance on memory semiconductors and deteriorating market supply and demand. Foreign investors continued to sell heavily, with few local buyers available to soak up their shares.

The National Pension Service (NPS), typically a stabilizing force during market downturns, played a minimal role in this latest selloff. It had suspended rebalancing during the previous rally, raising its domestic equity allocation, which experts warned was an unusual departure from established investment principles. This decision, coupled with the NPS' failure to reduce domestic equity exposure ahead of the rally, left it constrained and unable to cushion the decline.

Civic organizations and foreign investment banks expressed concerns about the NPS' loss of operational independence and its potential to amplify market volatility. While retail investors might have welcomed the NPS' decision to refrain from selling shares, the government avoided the political burden of a market correction. Yet, the latest plunge highlighted the trade-offs inherent in economic decisions.

By postponing necessary adjustments during the rally, the pension fund sacrificed flexibility when markets turned downward. Ultimately, the NPS must prioritize its long-term investment responsibilities over short-term market sentiment or political convenience to avoid becoming vulnerable when financial markets most need stability.