Seoul: Pension funds, including the National Pension Service (NPS), have become net buyers of South Korean stocks on the Korea Composite Stock Price Index (KOSPI) in July for the first time this year, according to recent bourse data.
According to Yonhap News Agency, the NPS and other pension funds acquired a net 68.4 billion won (US$46.8 million) worth of shares on the KOSPI during the first 24 days of July. This marked a shift from six consecutive months of net selling. Over the initial 17 trading sessions in July, pension funds were net buyers on 11 days, contrasting with six days of net selling.
With only five trading sessions left in the month, analysts predict that pension funds will likely continue this trend of net buying through the end of July. SK hynix emerged as their largest acquisition, with net purchases amounting to 425.8 billion won, followed by SK Innovation at 224.7 billion won and S-Oil at 174.4 billion won.
Conversely, pension funds sold a net 575.7 billion won worth of SK Square shares, alongside Samsung Electro-Mechanics shares valued at 313.6 billion won and Samsung Life Insurance shares worth 123.8 billion won. This buying activity occurred despite expectations that the NPS would resume portfolio rebalancing after its temporary suspension ended in June, which might have led to significant selling to capitalize on gains from the KOSPI's sharp rally.
Earlier this year, the NPS increased its target allocation to domestic equities to 14.9 percent in January and further to 20.8 percent in May. This decision was influenced by the KOSPI's emergence as one of the world's best-performing stock indexes this year, driven by an artificial intelligence (AI)-fueled rally. The index nearly doubled, rising to over 9,000 points in mid-June from around 4,300 at the year's start.
However, since late June, the market has experienced a correction, hovering around the 7,000-point level amid heavy foreign selling prompted by concerns over the future of AI investment. Analysts suggest that recent foreign outflows and the market correction have made the NPS more cautious about executing portfolio rebalancing.
An official from a local brokerage noted, "With foreign capital continuing to flow out of the market and inflows from retail investors also slowing, the NPS faced a greater burden in rebalancing its portfolio." NPS Chairman Kim Sung-joo previously emphasized the fund's cautious approach to portfolio rebalancing to minimize market impact.