Pension Funds Sell for the Longest Period in 11 Years... Why?

[Image source=Yonhap News]

[Asia Economy Reporter Koh Hyung-kwang] Pension funds, major players in the stock market, have been continuing their selling trend in the KOSPI market over the past month. This marks the longest selling period since the global financial crisis, with stocks sold amounting to 2 trillion won during this period. Analysts interpret this as a move to adjust the target proportion of domestic stocks in line with asset allocation policies.

According to the Korea Exchange on the 19th, pension funds have recorded net sales for 21 consecutive trading days in the KOSPI market from the 20th of last month until the day before. The total sales volume during this little over a month period reached 1.9924 trillion won, nearly 2 trillion won. This means they have been selling about 100 billion won worth of stocks daily on average over the past month.

This is the longest consecutive net selling period in 11 years since the global financial crisis, when from August 3 to October 1, 2009, pension funds showed net sales for 44 consecutive trading days, selling 3.5336 trillion won worth of stocks. Aside from this, the longest net selling period by pension funds this year was only 4 trading days (-666.6 billion won) from June 8 to 11.

Looking at monthly data, pension funds showed net buying dominance from January to May this year. In March and April, when the stock market began to rebound after the COVID-19 pandemic, they net purchased 3.0286 trillion won and 1.5358 trillion won respectively. However, in June they showed net sales of 743.4 billion won, followed by 1.1197 trillion won in net sales last month. This month, the selling trend has continued, with stocks worth 1.2678 trillion won sold up to the day before, already surpassing last month’s sales volume. This contrasts with individuals and foreigners who net bought 3.1022 trillion won and 1.0449 trillion won respectively over the past month.

The increase in net sales by pension funds is analyzed to be due to the National Pension Service (NPS), the 'eldest brother' among pension funds, adjusting the target proportion of domestic stocks. A financial investment industry official explained, "The NPS set the target proportion of domestic stocks at 17.3% by the end of this year, but as of the end of May, it had already reached 17.0%. Considering the stock market rose significantly after June, it is believed that the target proportion has already been fully met. Given the nature of pension funds moving according to asset allocation policies, the selling trend may continue for some time."

The stocks most sold by pension funds over the past month were SK Hynix (-374.3 billion won) and Samsung Electronics (-356 billion won). They sold more than 700 billion won worth of the top two stocks by market capitalization. Next were LG Chem (-111.5 billion won), NCSoft (-69.5 billion won), LG Innotek (-63.3 billion won), POSCO (-61.7 billion won), and S-Oil (-61.1 billion won), showing a selling trend mainly in large-cap stocks.

Conversely, pension funds net purchased over 50 billion won each in SK Telecom (58.7 billion won) and Kia Motors (51.6 billion won), whose stock prices rose less during this period. They also bought Netmarble (39.6 billion won), Korean Air (30.9 billion won), OCI (28.3 billion won), and Korea Zinc (28.2 billion won).

This content was produced with the assistance of AI translation services.