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Jung Eun-kyung, Minister of Health and Welfare, chairs the 5th National Pension Fund Management Committee meeting at the Government Complex Seoul on May 28. (Photo = Yonhap News) |
[Alpha Biz= Paul Lee] South Korea’s National Pension Service (NPS) has raised its target allocation to domestic equities, but analysts say significant selling pressure may persist due to elevated current holdings.
At its fifth meeting on May 28, the fund’s management committee approved a mid-term asset allocation plan for 2027–2031, increasing the domestic equity target from 14.9% to 20.8%. The adjustment was accompanied by reductions in other asset classes, including overseas equities, domestic bonds, and foreign bonds.
Despite the higher target, the NPS’s actual exposure to domestic equities remains well above the revised level. Following a recent surge in the Korean stock market, the fund’s domestic equity holdings are estimated to account for nearly 29% of total assets, significantly exceeding the new target.
Based on an assumed total fund size of KRW 1,800 trillion, the appropriate level of domestic equity holdings under the new allocation would be approximately KRW 374 trillion—implying an excess position of over KRW 140 trillion.
However, market participants expect the actual selling pressure to be more gradual. The NPS is likely to rebalance over time by allocating new inflows to other asset classes rather than executing large-scale immediate sell-offs. The fund has also temporarily expanded its strategic asset allocation (SAA) flexibility to manage market volatility.
Analysts estimate that net selling could be spread over the long term, potentially ranging from tens of trillions of won to around KRW 100 trillion, rather than reflecting the full excess amount.
The adjustment is seen as a pragmatic move to ease concerns over abrupt market impact, as the NPS approaches the end of its temporary rebalancing deferral period.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
