Public pension fund sold 1.5 trillion won over five days, triggering a market slump through 'rebalancing'

The public pension fund has begun rebalancing after its domestic stock holdings exceeded the target level. However, the move is widely seen as closer to a portfolio reshuffle carried out at a measured pace, limiting the impact on the market.
According to the Korea Exchange (KRX) on the 23rd, the public pension fund net sold a total of 2.8554 trillion won in the main board market over the past month. In particular, it sold 1.5623 trillion won worth of shares in just the five trading days from the 17th through the 23rd.
In January, the National Pension Service (NPS) temporarily relaxed its asset allocation standards to respond to heightened volatility in the domestic stock market. Last month, through the National Pension Fund Operation Committee, it raised this year's domestic stock target weight from 14.9% to 20.8% and expanded the allowable range for Strategic Asset Allocation (SAA).
But as the KOSPI surged sharply from the 5,000 level to the 9,000 level this year, the NPS's domestic stock weight appears to have exceeded the permitted range in a short period. Lee Kyung-min, a researcher at Daishin Securities, said, "As of the 19th, the domestic stock weight in the NPS portfolio is estimated to have expanded to around 31.4%." He added, "Selling pressure from rebalancing could gradually increase."
Given that the NPS fund is worth about 1,800 trillion won, its domestic stock holdings amount to roughly 540 trillion won. Based on the 20.8% target weight, a simple calculation suggests that about 180 trillion won in portfolio adjustments are needed. However, the actual scale of the adjustment may vary depending on changes in overseas stock and bond prices, new fund inflows, and future asset allocation strategies.
Still, Kim Sung-joo, chairman of the National Pension Service (NPS), said on the day that regarding adjustments to the domestic stock investment ratio, "We will make decisions by comprehensively considering domestic market conditions and overall market circumstances, under the principle of minimizing market shock." On the lifting of the rebalancing deferral, he stressed that "there is a public-interest principle that market impact must be minimized."
Market experts view the NPS's rebalancing as more than a simple supply-demand issue. They say it could become a key variable shaping the direction of the stock market in the second half of the year. As the NPS is the largest institutional investor in the domestic market, the sectors and stocks it chooses matter more than the size of its trading alone.
According to the Korea Exchange (KRX), the top net-sold stock by the public pension fund over the past month was Samsung Electro-Mechanics, at 777 billion won. It was followed by SK Square at 474.9 billion won, Mirae Asset Securities at 292.1 billion won, Doosan Group at 211.7 billion won, LG Innotek at 187.9 billion won, and Samsung Electronics Co., Ltd. Preferred Shares at 185.8 billion won. Artificial intelligence (AI) semiconductor stocks and brokerage shares, which had led the market's gains, were among the main selling targets.
Even so, the public pension fund appears to be making selective adjustments rather than cutting all stocks across the board. Over the past month, its top net-buy stocks were Naver at 470.9 billion won, SK hynix at 441.5 billion won, Hyundai Mobis Company Limited at 177.7 billion won, Samsung Life Insurance at 112 billion won, and Shinhan Financial Group Co., Ltd. at 101.5 billion won. For that reason, the prevailing view is that the chance of a flood of sell orders, as seen in the past, is limited. The NPS is spreading out its rebalancing execution volume to minimize market shock, and its daily trading size is also being managed more conservatively than before.
[email protected] Choi Doo-sun, Jeong Sang-gyun Reporter