National Pension Service's 60 Trillion Won 'Bomb'? Retail Investors Anxious... What Is the New Strategy After 'Rebalancing'?

The National Pension Service (NPS) has offloaded nearly 1.3 trillion won worth of stocks in the KOSPI market over four consecutive trading days.

Analysts suggest the NPS is preemptively selling domestic stocks ahead of the expiration of its temporary suspension on asset allocation rebalancing at the end of this month, as the KOSPI index has surged to the 9,100 level, significantly increasing the proportion of domestic equities in its portfolio.

According to the Korea Exchange on Tuesday (June 23), pension funds have net sold approximately 2.5 trillion won worth of stocks in the KOSPI market over the past month.

In particular, they net sold 1.2696 trillion won worth of stocks in the KOSPI market over four trading days from June 17 to June 22.

The market interprets this as the NPS preemptively reducing its domestic stock holdings ahead of the end of the temporary rebalancing suspension, which was in effect until the end of June.

The NPS manages target proportions for each asset class through rebalancing in accordance with its mid- to long-term asset allocation plan.

This strategy aims to ensure long-term returns and portfolio stability by selling excess assets or purchasing insufficient ones when the proportion of a specific asset deviates significantly from the target.

Following a Fund Management Committee meeting in January, the NPS temporarily suspended rebalancing until the end of June and raised its target proportion for domestic stocks for this year from 14.9% to 20.8% at the end of last month.

It also allowed for flexible operation of the strategic asset allocation range by up to ±8%.

As a result of these measures, the upper limit of the NPS's domestic stock proportion was raised to a maximum of 28.8%.

However, with the KOSPI subsequently soaring to the 9,100 level, it is reported that the NPS's domestic stock proportion has exceeded 30%.

Some in the market speculate that the NPS may need to sell up to 60 trillion won worth of domestic stocks in the future to reduce its domestic equity holdings that have exceeded the permitted range.

Nevertheless, the prevailing view in the market is that the possibility of a "selling bomb" similar to the past is limited.

Experts suggest that the NPS is likely to sell the stocks in a dispersed manner over a long period, having reduced the daily rebalancing volume to minimize market impact.

Reported by Kim Jiuk | Video by Lee Dain | Graphics by Yang Hyemin | Produced by SBS Digital News
※ Please note: This article was translated by AI and may contain errors.