This article appeared in Signal, a capital markets compass, at 6:04 p.m. on June 30, 2026.
Starting in July, the National Pension Service (NPS) will apply a cap on its domestic stock holdings. The NPS Fund Management Division plans to conduct rebalancing using moving average values. Rather than dumping shares into the market at once to immediately meet the target ratio, it will apply the adjustment gradually.
According to government sources Tuesday, a cap of 20.8% of the total fund size will apply to the NPS's domestic stock holdings from July. The cap had been suspended during the first half of the year, so the fund did not engage in mechanical selling despite substantial overshooting, but restrictions will take effect from July. Applying strategic asset allocation (SAA, ±6%) and tactical asset allocation (TAA, ±2%) to the 20.8% domestic stock ratio, the fund can hold domestic stocks up to 28.8% of its total size.
The Fund Management Division intends to carry out the readjustment in a way that minimizes market shock. The fund's rebalancing works such that the Fund Management Committee sets the ratio and the Fund Management Division proceeds according to its investment strategy. Typically, the Fund Management Division applies the cap on a monthly basis rather than meeting the ratio on a daily basis. The method of estimating the domestic stock ratio over a month is done through a "moving average." Applying a moving average makes it easier to identify the overall trend rather than short-term fluctuations.
Under the moving average method, the cap applied from July is not determined as of July 1 but applies the average of the stock ratio from June 1 to July 1. The next day, July 2, rebalancing is expected to be carried out based on the average from June 2 to July 2.
This method has the advantage of lowering the likelihood of large-scale selling. If the stock ratio were met on a daily basis, situations could arise in which shares would have to be dumped immediately depending on volatility, but because a monthly average is applied, gradual rebalancing becomes possible. An official familiar with the NPS said, "The NPS's basic position is to pursue rebalancing in a way that minimizes market shock," adding, "The reason a one-month average is the standard is largely to allow sufficient review, because the valuation amount fluctuates."
In fact, the NPS has continued net selling for six consecutive months recently to reduce the shock of resuming rebalancing. The combined net selling over six months reaches approximately 8.7 trillion won. As the fund holds mostly large-cap stocks that have a significant impact on the market when sold, NPS Chairman Kim Sung-joo has also stressed the principle of rebalancing in a way that minimizes market shock.
However, if the KOSPI surges past 9,000 points, the scale of selling itself is expected to inevitably grow. According to Shinyoung Securities, the NPS's domestic stock ratio is estimated at 29.6% when the KOSPI is at 8,500 points and 30.8% when it is at 9,000 points. A Ministry of Health and Welfare official said, "We do not disclose rebalancing rules because the fund's strategic actions could be exposed externally."
Shinyoung Securities forecast that if the NPS uses only SAA without TAA, 74.4 trillion won in shares would be released when the KOSPI is at the 9,000 level. At the 10,000 level, the figure is 120.9 trillion won.
