Foreign Investors Sell 71 Trillion Won as National Pension Fund Prepares for 60 Trillion Won Rebalancing

 
This year, foreign investors have sold more than 130 trillion won in the South Korean stock market. The selling is attributed to a rapid rise in the Korean market, prompting global funds to engage in rebalancing. Analysts predict that the National Pension Fund's rebalancing could reach up to 60 trillion won starting in July. This foreign and institutional rebalancing is seen as a significant factor that could shake the stock market.

According to the Korea Exchange, foreign investors net sold 4.6 trillion won on the KOSPI market on this day. In the second quarter (April to June), they sold approximately 75.4 trillion won in the securities market, and they have net sold 31.8 trillion won so far this month. The cumulative net selling for the year has reached 132 trillion won. Analysts attribute this to mechanical rebalancing by global funds in response to the surge in the Korean stock market.

Meanwhile, a large-scale rebalancing by the National Pension Fund is also anticipated. Concerns are growing that if the National Pension Fund, which has been filling the gap left by foreign investors, also engages in rebalancing, it could significantly disrupt the supply and demand environment in the domestic stock market in the second half of the year.

The National Pension Fund's rebalancing is expected to begin next month, as the recent surge in the stock market has pushed its domestic equity holdings well above target levels. As of the end of March, the National Pension Fund's domestic stock holdings were valued at 321 trillion won, accounting for 21% of its total assets of 1,526 trillion won. Following the KOSPI's surge to around 8,500 at the end of May, this proportion increased to approximately 29%. It is estimated that as of June 19, when the KOSPI surpassed 9,000, the domestic equity proportion rose to 31.4%.

Consequently, there are forecasts that the National Pension Fund may need to sell up to 60 trillion won to align with its target allocation. In fact, the National Pension Fund has already net sold about 2.3 trillion won this month, leading some in the securities industry to interpret this as a preliminary adjustment ahead of the full rebalancing. However, some analysts suggest that the rebalancing may be executed in a manner that minimizes market shocks, indicating that the actual impact may be less severe than market fears suggest.