Stock Market Gripped by Fear Over 50 Trillion Won 'Selling Bomb'

Anxiety is mounting in the stock market as the National Pension Service (NPS) is set to begin its rebalancing process tomorrow, July 1, which involves selling 50 trillion won worth of shares.

There are concerns that this could increase downward pressure on stock prices, especially when combined with the recent strengthening of foreign selling trends.

Rebalancing is a measure where assets are mechanically bought or sold if the proportion of invested assets deviates from the target.

As of June 26, the estimated proportion of domestic stocks held by the National Pension Service stood at 30%, which is 9.2 percentage points higher than this year's plan.

The National Pension Service's domestic stock holdings have exceeded this year's target by 164 trillion won, and based on the closing price on June 29, the fund is in a position where it must sell approximately 50 trillion won worth of domestic stocks.

The KOSPI 200 Volatility Index, often called the "Korean fear index," closed at 96.94 yesterday, marking its highest level ever.

This is the highest level since April 13, 2009, signaling that market anxiety has reached an extreme level.

Along with the National Pension Service's selling, the concentration in the semiconductor sector is also making investors uneasy.

From the beginning of this year to date, the cumulative return of the semiconductor sector has reached 226%. As the price burden for semiconductors has increased, investors are showing movements to realize profits and look for the next leading stocks.

"FOMO" (fear of missing out), the fear of being left out of the investment rally during a period of surging stock prices, has led to a significant increase in debt-financed investments. For individual investors who bought stocks with borrowed money in this way, the recent volatile market is a major burden.

The possibility of interest rate hikes in the United States remains a factor weighing on the domestic stock market.

Most major Wall Street investment banks assess that the Federal Reserve, under the new chair Kevin Warsh, will end its interest rate cut cycle.

On the other hand, some evaluate that the concerns over a "selling bomb" from the National Pension Service are exaggerated.

This is because the National Pension Service may sell the shares in a distributed manner over a long period, as it has reduced the scale of rebalancing that can be executed per day to minimize market impact.

The chairman of the National Pension Service also emphasized the principle of rebalancing to minimize market impact on June 23.

Reported by Jung Da-eun | Video by Kim Na-on | Graphics by Yang Hye-min | Produced by SBS Digital News
※ Please note: This article was translated by AI and may contain errors.