South Korea's National Pension Service will resume asset rebalancing next month and may sell up to 60 trillion won [1] of domestic equities.
The move is significant because the massive scale of potential selling could create downward pressure on the domestic stock market. As one of the region's largest institutional investors, the fund's shifts in allocation often dictate broader market trends.
The decision follows a period of temporary pause in rebalancing triggered by a strong rally in the KOSPI. This surge pushed the fund's domestic stock weight to 30% [2], which exceeds its internal target thresholds.
To mitigate the impact of mechanical selling, the pension service recently adjusted its targets. Last month, the fund raised its domestic stock target weight from 14.9% to 20.8% [3]. Additionally, the fund widened its asset allocation range to ±8% [4].
Despite these adjustments, the fund's current holdings remain above the new upper bound of 28.8% [5]. This discrepancy necessitates the planned sell-off to bring the portfolio back in line with its strategic goals.
An anchor for YTN said that the fund is expected to sell these domestic stocks through the end of the year [1]. The rebalancing process ensures that the fund does not become over-exposed to a single market, maintaining a diversified risk profile across its global investments.
“The fund may sell up to 60 trillion won in domestic equities by year-end.”
This rebalancing indicates a shift toward global diversification as the National Pension Service reduces its reliance on the South Korean market. While the fund raised its target weight to avoid a sudden market shock, the remaining gap between current holdings and the 28.8% ceiling suggests that a substantial volume of shares will enter the market, potentially limiting the upside of the KOSPI rally through the end of the year.
