Last Year 25 Trillion Won, This Year 8 Trillion Won in Just Ten Days... Institutions Relentlessly Flooding the Market with Sell Orders

Last year, net selling of 25.5 trillion won... the largest ever

This year, net selling of 8 trillion won in just 7 trading days

Impact of fund redemptions and pension funds adjusting their portfolio weights

[Asia Economy Reporter Ko Hyung-kwang] The selling pressure from institutional investors in the domestic stock market is intensifying. After unloading more than 25 trillion won worth of stocks?the largest scale ever?in the KOSPI market last year, they have already sold over 8 trillion won worth of shares within just ten days this year. This is attributed to a combination of fund redemptions and pension funds adjusting their stock portfolio weights. The selling trend by institutions is expected to continue for the time being.

According to the Korea Exchange on the 13th, the net amount sold by institutional investors in the KOSPI market last year was 25.5344 trillion won. This is the largest annual net selling amount on record, surpassing the previous record of 25.4693 trillion won in 2009. Institutional investors recorded net buying only once in March last year (116.9 billion won), selling stocks continuously throughout the rest of the year. In particular, starting with 2.7104 trillion won in June, the selling volume increased in the second half of the year with 3.0635 trillion won in July, 3.5636 trillion won in August, and 4.1337 trillion won in September, followed by approximately 2 trillion won each in November and December.

This year, the intensity has grown even stronger. Up to the previous day this year, institutional investors’ net selling in the KOSPI market reached 8.6761 trillion won. The amount sold in just 7 trading days exceeds one-third of last year’s total net selling (25.5344 trillion won). In contrast, during the same period, individual investors purchased stocks worth 8.5505 trillion won, while foreign investors recorded a net selling of only 121.9 billion won.

The selling pressure is led by pension funds. Pension funds have net sold 3.269 trillion won in the KOSPI market this year, accounting for 40% of the total institutional net selling (8.6761 trillion won). Following them, financial investment firms (2.1243 trillion won), investment trusts (1.4018 trillion won), and insurance companies (1.1004 trillion won) are also leading the selling.

Among these, pension funds, which have the largest selling volume, appear to be increasing their selling to adjust the increased domestic stock proportion to an appropriate level as the stock market rises. Pension funds adjust asset weights according to pre-established fund management plans. For example, the National Pension Service (NPS), a major pension fund, had a domestic stock proportion of 17.3% at the end of last year. However, as of the end of October last year, the NPS’s domestic stock proportion was 18.0%, meaning it needed to reduce this by 0.7 percentage points by year-end, which likely sustained the selling pressure. For the NPS, managing 770 trillion won, a 0.7 percentage point adjustment corresponds to approximately 5.4 trillion won.

Moreover, the domestic stock proportion target to be met by the end of this year has been lowered further to 16.8%, 0.5 percentage points less than the previous year-end. This means about 3.85 trillion won worth of domestic stock assets must be sold off. This explains why pension funds have been selling stocks in the KOSPI market every single day this year. An asset management company official explained, "Considering the performance of other assets held by the NPS, the actual selling volume could be much larger."

Fund redemptions are also cited as a factor increasing institutional selling. As the stock market rises, individual investors have shifted from indirect investments such as funds to direct stock purchases, forcing institutions to sell stocks to meet redemption demands. A securities company official said, "When money flows out of funds, asset management companies have to sell the stocks held by the funds to provide redemption payments. In the past two months, about 4.6 trillion won has been withdrawn from domestic equity funds. This explains why investment trusts, represented by public offering funds managed by asset management companies, and securities firms have large selling volumes."

The institutional selling trend is expected to continue for the time being. A financial investment industry official said, "Among institutional investors, pension funds, which have the greatest influence, have already filled their domestic stock quotas, making it difficult to buy more stocks. Meanwhile, redemptions of equity funds by public and private fund investors continue, so securities firms and investment trusts are expected to maintain their selling pressure for the foreseeable future."

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