South Korea's National Pension Service resumed stock rebalancing during the first three trading days of July but reduced its selling intensity compared to the previous month, according to Korea Exchange data released July 5. The pension fund net sold 215.8 billion won in the securities market from July 1-3, averaging 71.9 billion won per day—a 35.6% decrease from June's daily average of 111.7 billion won. The reduced selling pressure came as the KOSPI index underwent a sharp correction, temporarily falling to the 7,300 level, while fund managers applied a 'minimize market impact' principle. The rebalancing follows the pension fund's mid-to-long-term strategic asset allocation plan, which adjusts holdings when specific asset classes significantly deviate from target weightings.
National Pension Service Sells Samsung Electronics, Buys SK Hynix During July 1-3
The pension fund's transaction pattern showed net selling of 218 billion won on July 1, 53.4 billion won on July 2, and net buying of 55.7 billion won on July 3. Samsung Electronics topped the net selling list at 212.5 billion won over the three-day period. Other major net sales included SK Square (196.7 billion won), Samsung Electro-Mechanics (124.5 billion won), Samsung C&T (65.2 billion won), Samsung Electronics preferred shares (36.4 billion won), SK Inc. (27.9 billion won), LG Innotek (27.7 billion won), Samsung Life Insurance (26.4 billion won), ISC (24.2 billion won), and Hyundai Mobis (21 billion won).
Despite the overall reduction in domestic stock holdings, the fund purchased shares in select sectors including semiconductors, defense, financials, biotech, and consumer goods. SK Hynix, which is preparing for a US ADR listing, led net purchases at 108.1 billion won. Hanwha Aerospace (56.7 billion won), Shinhan Financial Group (52.4 billion won), Celltrion (38.3 billion won), Amorepacific (38.3 billion won), Korean Air (36.3 billion won), HYBE (33.7 billion won), and LS (32.1 billion won) also ranked among top net purchases.
Fund Managers Apply Strategic Asset Allocation Through Rebalancing
The National Pension Service manages target weightings for each asset class through rebalancing aligned with its mid-to-long-term asset allocation plan. When a specific asset's weighting significantly deviates from the target, the fund sells excess assets or purchases underweighted assets. This mechanism aims to realize profits when markets overheat and accumulate assets when they are undervalued, thereby pursuing long-term returns and portfolio stability.
The Fund Management Committee suspended rebalancing from January through the end of June as the KOSPI climbed to record highs. In May, the committee raised the domestic stock target weighting from 14.9% to 20.8% and expanded the strategic asset allocation tolerance band from ±3 percentage points to ±6 percentage points. Combined with the tactical asset allocation band of ±2 percentage points, this allows flexible operation within a maximum range of ±8 percentage points. Market analysts estimated the rebalancing scale could reach 50-70 trillion won as the KOSPI approached the 9,000 level at the end of last month.
Officials Emphasize Market Impact Minimization Principle
The Fund Management Committee reduced daily maximum selling limits to minimize rebalancing's market impact. Monthly and annual selling limits were also adjusted. The committee left open the possibility of raising domestic stock limits again near year-end depending on market conditions.
Jung Eun-kyeong, Minister of Health and Welfare and chair of the National Pension Fund Management Committee, stated at the committee meeting held at the Government Complex Seoul on July 2: "Interest in the National Pension's movements after the rebalancing suspension ends in July is very high. Even if rebalancing occurs, we will closely monitor to ensure market impact is minimized."
Kim Seong-joo, Chairman of the National Pension Service, posted on social media on July 1, the day rebalancing resumed, emphasizing: "Even if we enter rebalancing, the possibility of it becoming a 'bomb' is zero." Kim explained: "If we remove too much because it's too heavy, it will go off track again, so we must do it precisely and gradually. That's why large-scale selling in a short period cannot happen."
FAQ
What did South Korea's National Pension Service do during July 1-3?
The National Pension Service net sold 215.8 billion won in the securities market over three trading days (July 1-3), averaging 71.9 billion won per day. This represented a 35.6% decrease from June's daily average net selling of 111.7 billion won. The fund sold Samsung Electronics (212.5 billion won) while purchasing SK Hynix (108.1 billion won) as the top transactions.
Why did the National Pension Service reduce its selling intensity in July?
The reduced selling pressure occurred as the KOSPI index underwent a sharp correction, temporarily falling to the 7,300 level, which decreased rebalancing pressure. Additionally, fund managers applied a 'minimize market impact' principle. Officials adjusted daily, monthly, and annual selling limits to reduce the rebalancing's effect on the market.
How does the National Pension Service's rebalancing mechanism work?
The National Pension Service manages target weightings for each asset class through its mid-to-long-term strategic asset allocation plan. When a specific asset's weighting significantly deviates from the target, the fund sells excess assets or purchases underweighted assets. The mechanism aims to realize profits when markets overheat and accumulate assets when undervalued, pursuing long-term returns and portfolio stability.
