Capital Market Opinion (Ceased)
2012 Apr/10
Enhancing Institutional Investors’ Role in the Korean Stock Market
April 10, 2012
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- Summary
- Massive net capital outflows, or sudden stops, and the 2008 stock market crash are related to the lack of institutional investors` buying capacity. Their asset accumulation is not too low but their asset allocation has been conservative. Retirement pension providers and insurance companies should invest more in riskier assets and increase average holding periods for stocks to avoid negative spreads and to match liabilities and assets, given that long-term investments are integral for asset-liabilities management (ALM). Furthermore, institutional investors should be given autonomy and flexibility in regards to stop-loss rules, which are now strictly implemented for regulatory purposes, in order to relieve excessive selling during distress.