South Korea's National Pension Service eased rebalancing pressure as KOSPI's decline brought domestic stock weight within strategic limits. Meritz Securities estimated NPS domestic stock weight at 26.3% as of the 8th, down from 31.1% on the 22nd of last month, now below the 26.8% Strategic Asset Allocation (SAA) upper limit. The 20.5% KOSPI drop from 9114.55 to 7246.79 reduced mechanical selling pressure that had been anticipated when the weight exceeded the allowable range. Pension funds net sold 2158 billion won from the 1st to 3rd and 989 billion won from the 6th to 8th, but turned net buyers on the 9th (735 billion won) and 10th (355 billion won), marking a shift from concentrated early-month selling.
NPS Domestic Stock Weight Drops to 26.3% Amid KOSPI Decline
Meritz Securities estimated the National Pension Service's domestic stock weight at 26.3% as of the closing price on the 8th, according to data reported by the financial investment industry. This weight was previously estimated at 29.9% at the end of May, rose to 31.1% on the 22nd of last month as KOSPI climbed, then declined to 29.5% at the end of last month before reaching 26.3% on the 8th of this month. During this period, KOSPI peaked at 9114.55 on the 22nd of last month and closed at 7246.79 on the 8th, a 20.5% decline. Samsung Electronics and SK Hynix fell 23.5% and 28.9% respectively over the same period. The decline in stock prices reduced the valuation of NPS's domestic equity holdings, lowering the weight of domestic stocks in the overall portfolio.
NPS Weight Falls Below SAA Upper Limit, Reducing Selling Pressure
The National Pension Service's 2026 domestic stock target weight is 20.8%. Adding the Strategic Asset Allocation (SAA) allowance of 6 percentage points, the domestic stock weight can rise to 26.8% and remain within the operational range. If the Tactical Asset Allocation (TAA) allowance of 2 percentage points is also included, the weight could reach 28.8%, but NPS is known not to utilize this maximum flexibility. Applying Meritz Securities' estimate of 26.3%, the domestic stock weight that had exceeded the SAA upper limit until last month has returned within the allowable range following the recent market correction. This means the pressure to urgently sell domestic stocks to reduce excess weight has diminished. Market participants had previously voiced concerns about NPS-driven selling volume, as the sharp rise in KOSPI during the first half of the year was estimated to have pushed NPS's domestic stock weight significantly above the target upper limit. NPS had delayed rebalancing to minimize market impact, but the grace period ended at the end of last month, leading to forecasts that the fund could begin reducing holdings this month, with potential selling volume estimated at up to 74 trillion won. Yeom Seung-jun, a researcher at Meritz Securities, stated that as of the closing price on the 8th, the domestic stock weight stood at 26.3%, within the SAA allowable range, and that NPS's mechanical selling pressure is expected to ease.
Pension Funds Record Net Buying on 9th and 10th After Early-Month Selling
Recent pension fund trading activity reflects a similar shift. According to KOSCOM CHECK data, pension funds and similar entities net sold 2057 billion won on the securities market (Korea Exchange and Nextrade combined) from the 1st to 10th. Immediately after the end of the rebalancing grace period, from the 1st to 3rd, they net sold 2158 billion won. From the 6th to 8th, when the market decline intensified, they maintained a net selling position of 989 billion won, but on the 9th they net bought 735 billion won, followed by 355 billion won on the 10th. While cumulative activity for the month remains net selling, the consecutive net buying on the 9th and 10th indicates that the concentrated selling seen at the beginning of the month has subsided. The "pension funds and similar entities" category includes not only the National Pension Service but also the Private School Teachers Pension, the Government Employees Pension, and various mutual aid associations. However, given NPS's dominant scale in asset management, the market uses this supply-demand data as a reference indicator to gauge the impact of NPS rebalancing.
Analysts Caution Against Interpreting Activity as Active Buying Shift
Recent changes in pension fund supply and demand cannot be attributed solely to the easing of NPS's rebalancing burden. Bargain hunting may have flowed into stocks with excessive declines following the market plunge, or the market rebound on the 9th and 10th may have influenced trading activity. A securities industry official stated that the recent stock price decline appears to have significantly eased the immediate pressure on NPS to reduce domestic stock holdings on a large scale, but that it is more appropriate to interpret this as a reduction in mechanical selling pressure rather than an active shift to buying. The official added that the market rebound on the 9th and 10th may have raised the valuation and weight of domestic stocks again, so rebalancing conditions could change depending on subsequent market movements.
FAQ
What is the National Pension Service's current domestic stock weight?
Meritz Securities estimated the National Pension Service's domestic stock weight at 26.3% as of the closing price on the 8th, down from 31.1% on the 22nd of last month.
Why did NPS's selling pressure ease recently?
The 20.5% decline in KOSPI from 9114.55 on the 22nd of last month to 7246.79 on the 8th reduced the valuation of NPS's domestic stock holdings, bringing the weight below the Strategic Asset Allocation upper limit of 26.8% and easing the need for mechanical selling.
How did pension funds trade on the 9th and 10th?
Pension funds net bought 735 billion won on the 9th and 355 billion won on the 10th, reversing the net selling trend observed from the 1st to 8th.
