Korea Pension Scraps Minimum Broker Fee to Reduce Trading Costs; The fund holds about 6% of publicly traded shares in the $1.1 trillion equity market
August 9, 2013 Leave a comment
Korea Pension Scraps Minimum Broker Fee to Reduce Trading Costs
South Korea’s National Pension Service, the biggest investor in the country’s equity market, scrapped the minimum fees it pays brokers to execute stock trades as the fund seeks to reduce transaction costs.
NPS, the nation’s largest pension fund, ended its policy of paying a minimum 0.15 percent fee as of last month, Lee Yun Ji, a spokeswoman for the fund in Seoul, said in a phone interview today. Brokers will need to “write down” their fees and the new policy will spur competition for commissions, Lee said. Samsung Securities Co. (016360) and Mirae Asset Securities Co. (037620) retreated in Seoul trading today, while the Kospi Index rose 0.3 percent.The NPS is seeking to reduce trading fees just as turnover on South Korea’s stock exchange falls to the lowest levels in six years, curbing revenue for local brokers. The fund holds about 6 percent of publicly traded shares in the $1.1 trillion equity market, according to Yoon Young Mok, the head of the NPS’s strategy unit in Seoul. It had 408 trillion won ($367 billion) of assets as of April.
“With the minimum charge eliminated, local brokers will be in a cutthroat fight against each other to cut their fees, which will further burden the already-struggling industry,” said Han Sang Soo, a Seoul-based money manager at Samsung Asset Management Co., which oversees about $114 billion. “But it will be positive for the pension fund’s subscribers.”
Trading Slump
The NPS said in June it plans to boost equity holdings and reduce bond investments to increase returns for members. The latest five-year asset allocation plan calls for the pension fund to increase stocks to more than 30 percent of assets by the end of 2018 from 26.7 percent in 2012, according to a May statement.
Samsung Securities, South Korea’s biggest brokerage by market value, slipped 0.1 percent in Seoul trading today after earlier rising as much as 0.7 percent. Mirae Asset Securities declined 1.5 percent. Phone calls seeking comment from the brokerages weren’t immediately returned.
The 30-day average value traded of Kospi Index shares fell to about 3.6 trillion won today, the lowest level since April 2007, according to data compiled by Bloomberg. The benchmark index has declined 5.7 percent this year, versus an 11 percent drop in the MSCI Emerging Markets Index.
To contact the reporter on this story: Sharon Cho in Seoul at ccho28@bloomberg.net
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