As concerns about a potential "sell-off bomb" spread in the domestic stock market ahead of the resumption of the National Pension Service's (NPS) rebalancing, Chairman Kim Sung-joo took to social media to address the issue directly.
In a post titled "The Truth About the NPS Rebalancing and the 74 Trillion Won Sell-Off," Kim stated on July 1, "Even if the NPS begins rebalancing, the possibility of a bomb is zero."
Recent analyses in the financial sector suggested that the adjustment of the NPS's domestic stock holdings could lead to a sell-off of up to 74 trillion won. The NPS's valuation and proportion of domestic stocks have significantly increased due to a surge in the domestic stock market this year. Previously, the NPS had suspended rebalancing until the end of June, with adjustments set to resume in July.
This has raised fears in the market that the NPS might need to sell off a large volume of domestic stocks. Some analysts predicted that if the KOSPI index remains high, the NPS could face sell-off amounts in the tens of trillions of won to reduce its domestic stock proportion.
Kim strongly refuted these analyses, asserting, "The reallocation of the NPS's domestic stock holdings has suddenly become a topic of interest. The claim that the NPS must sell off 74 trillion won worth of stocks is fundamentally incorrect."
He expressed skepticism about the calculations behind such figures, questioning, "How did they arrive at these numbers? It’s baffling when analysts start acting like fortune tellers."
Kim emphasized that rebalancing does not necessarily equate to a large-scale sell-off. He posed the question, "Is rebalancing a sell-off bomb?" and explained that the fund management committee had decided in May to implement rebalancing gradually over an extended period by changing the rules.
He clarified, "Rebalancing is, by definition, a readjustment. If we drastically reduce holdings because they seem too heavy, it could lead to further imbalances. Therefore, rebalancing cannot result in a large-scale sell-off in a short period."
Kim also noted that the criteria for adjusting the NPS's assets are not solely based on the KOSPI index. He stated, "The decision to enter rebalancing is not simply because the KOSPI has risen. The NPS's rebalancing strategy considers various factors, including the returns on other assets like bonds and alternatives, stock price volatility, interest rates, and exchange rates."
In fact, in May, the NPS Fund Management Committee adjusted the target proportion of domestic stocks to 20.8% by the end of 2026. They also temporarily expanded the allowable range for strategic asset allocation in domestic stocks and reduced the maximum daily rebalancing volume to minimize market impact, although specific ranges were not disclosed for reasons of financial market stability and fairness in fund management.
Kim cautioned against excessive market fears, urging, "Please do not be swayed by the claims of some non-experts or media reports that incite undue panic by mentioning a sell-off bomb, nor should you react excessively to market volatility."
* This article has been translated by AI.
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