The recent sharp decline in the KOSPI has significantly eased the rebalancing pressure on the National Pension Fund. Initially, there were forecasts of a potential sell-off amounting to 70 trillion won, but the actual selling volume has been more limited than expected. Instead, foreign investors have been taking profits, particularly in the semiconductor sector, contributing to increased market volatility.
According to the Korea Exchange, pension funds, including the National Pension Fund, recorded a net sell of 202.1 billion won in the securities market over eight trading days from July 1 to July 10. The average daily net selling amount was 25.3 billion won, which is only a quarter of last month's average of 111.7 billion won. This level is far from the previously raised concern of a 70 trillion won rebalancing sell-off.
The easing of the National Pension Fund's selling pressure is largely attributed to the KOSPI's sharp decline. The index fell approximately 20.5% from 9,114.55 on June 22 to 7,246.79 on July 8. During this period, the market experienced significant volatility, with daily fluctuations around 5%.
The National Pension Fund conducts rebalancing to align its asset allocation with target weights. This year, due to a surge in the KOSPI, the proportion of domestic stocks exceeded the target, prompting the fund to temporarily suspend rebalancing until the end of June. In May, the fund raised its target allocation for domestic stocks from 14.9% to 20.8% and expanded the strategic asset allocation (SAA) range from ±3 percentage points to ±6 percentage points. With tactical asset allocation (TAA) applied, the domestic stock allocation can be maintained at a maximum of 28.8%.
According to Meritz Securities, the National Pension Fund's allocation to domestic stocks increased from 29.9% at the end of May to 31.1% on June 22, when the KOSPI hit an all-time high. However, as the index dropped to 7,246.79 on July 8, the allocation is estimated to have decreased to 26.3%. This adjustment has alleviated much of the mechanical selling pressure within the strategic asset allocation range.
During this period, the most heavily sold stock by pension funds was SK Square, with 335.1 billion won sold. Other significant net sales included Samsung Electro-Mechanics (294.4 billion won), Samsung Electronics (125.0 billion won), Samsung C&T (62.7 billion won), Hanwha Ocean (59.7 billion won), LG Innotek (54.7 billion won), and LG Energy Solution (51.4 billion won). Conversely, the pension fund's largest net purchase was of SK Hynix, totaling 219.4 billion won, followed by Shinhan Financial Group (100.6 billion won), Korean Air (86.0 billion won), HYBE (79.0 billion won), S-Oil (77.8 billion won), Kia (58.6 billion won), and Celltrion (56.7 billion won).
Meanwhile, recent market fluctuations have been more influenced by foreign trading than by the National Pension Fund's rebalancing. During the same period, foreign investors net sold 12.37 trillion won in the securities market, while individual investors net bought 9.36 trillion won, absorbing the sell-off. The foreign selling trend is interpreted as profit-taking aligned with the semiconductor industry's cyclical performance. Meritz Securities noted that foreign investors have historically reduced their holdings when the operating profit growth rate of semiconductor companies peaks, suggesting that this adjustment is more about portfolio rebalancing rather than a structural exit from the Korean market.
Yoon Yeo-sam, a researcher at Meritz Securities, stated, "For foreign buying to reverse, there needs to be a consensus in the market that this memory cycle is different from past cycles."
* This article has been translated by AI.
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