[Yonhap]
[Yonhap]

The National Pension Service has moved to directly address market fears of a massive stock sell-off as it resumes domestic equity rebalancing this month. Amid a string of forecasts warning that tens of trillions of won in shares could flood the market at once — fueled by the Kospi's recent rally pushing domestic equity holdings above target — the NPS said any adjustment would be gradual and that alarm over large-scale selling had been overblown.

The NPS said rebalancing is not a process for dumping large volumes of shares in a short period, but a routine portfolio management exercise aimed at maintaining target allocations across asset classes. Market estimates citing tens of trillions of won in potential selling represent only a theoretical adjustment figure based on a set of assumptions, the fund said, and do not reflect the actual scale of selling planned for this month.

NPS Chairman Kim Sung-joo directly rebutted the so-called "74 trillion won sell-off bomb" theory Tuesday, posting on his personal social media account. "First of all, the '74 trillion won' figure is wrong," Kim said. "I don't know how it was calculated, but it's an absurd number. I find myself wondering when analysts started playing fortune teller."

The NPS resumed domestic equity rebalancing this month after suspending it temporarily from January. The process is designed to keep each asset class within its target allocation. According to materials the NPS released, the target weight for domestic equities is set at 20.8 percent through 2027. Any future adjustment will be decided through mid-term asset allocation discussions next year.

The fund maintains a policy of not disclosing the specific timing, scale or individual stocks involved in its trades. Releasing operational plans in advance could invite front-running or copycat trading, distorting the market and hurting the fund's returns, it said.

Kim also drew a line against characterizing rebalancing as a "sell-off bomb." "Even if the NPS enters a rebalancing phase, the probability of it becoming a 'bomb' is zero," he said. "At the fund management committee meeting in May, we revised the rebalancing rules so that it would be carried out gradually over an extended period."

Rebalancing is a portfolio management approach used when the weight of a particular asset class drifts outside its target range due to significant price moves. When domestic equities become overweight, the fund trims that position and adds to underweight assets to restore overall portfolio balance.

The process is fundamentally a risk management exercise rooted in long-term investment principles, not short-term profit-taking. The tens-of-trillions-of-won figures cited in the market are theoretical calculations based on assumed adjustment targets and cannot be treated as equivalent to actual execution volumes, the NPS said.

Kim likened rebalancing to a scale or a seesaw. "'Rebalancing' means exactly what it says — readjustment," he said. "Think of a scale or a seesaw: if one side gets too heavy or too light and tips, you have to take a little off the heavy side or add a little to the light side to restore balance."

"If you take off too much because it's too heavy, it tips the other way — so you have to do it carefully, in small increments," he added. "That is why rebalancing cannot involve large-scale selling over a short period."

The NPS also said its rebalancing decisions are not driven solely by the Kospi level. "It's not as simple as the Kospi going up and us starting to rebalance," Kim said. "We consider a range of factors — not just share price levels, but also returns on bonds, alternative assets and other asset classes, share price volatility, interest rates and exchange rates." He added that detailed criteria cannot be disclosed to prevent outside parties from exploiting the fund's strategy for their own gain.

That said, NPS portfolio adjustments are not without market impact. As the country's largest institutional investor, sustained net selling by the fund during rebalancing — compounded by variables such as foreign investor flows, interest rates and exchange rates — could dampen the market's upward momentum in the short term. Some analysts note that supply-side pressure could emerge particularly in large-cap stocks that have posted the biggest recent gains.

Even so, concluding that tens of trillions of won will pour into the market within days would be a stretch, analysts say. The actual timing and scale of NPS execution are difficult to verify from the outside, and the fund is likely to spread its trades over an extended period depending on market conditions.

Ultimately, what investors should watch during this rebalancing phase is not sensational "sell-off bomb" forecasts, but the actual flow of pension fund selling and how the market absorbs it. Even if the NPS proceeds with its domestic equity weight adjustment as planned, the process is likely to unfold gradually, the fund said.

Kim doubled down on the point that the NPS is a public pension fund managing the nation's retirement savings over the long term — not an investor chasing short-term gains. "The NPS is not an institution that sells immediately when prices rise to lock in profits, or buys immediately when they fall," he said. "The NPS's mission is to work for the people's interests and retirement well-being as a 'universal owner' that grows alongside the Korean economy, its industries and its companies."

Market analysts say investors should, for now, monitor the NPS's actual net selling volume alongside foreign investor flows, corporate earnings and policy variables. How the market digests the rebalancing — rather than the rebalancing itself — may prove to be another key factor shaping the direction of the stock market going forward.

Separately, the Ministry of Land, Infrastructure and Transport announced Tuesday that it would designate parts of Hwaseong, Yongin and Guri in Gyeonggi Province as regulated zones — covering adjustment target areas and speculative overheating districts — effective Wednesday. The move drew criticism from some residents in Guri, where one major apartment complex had already seen its sale price rise by 300 million won over the past year, with buyers saying the restrictions had come too late.


rainbow@heraldcorp.com