South Korea's stock market crashes again due to 'viral rumors': Reports claim the National Pension Service will begin rebalancing its portfolio in July, potentially selling up to 74 trillion won worth of domestic equities

South Korea's National Pension Service (NPS) is expected to resume domestic equity rebalancing, triggering renewed market concerns over liquidity conditions for Korean equities. According to a June 30 report by The Korea Herald, the recent sustained surge in the KOSPI index has pushed the NPS's allocation to Korean stocks significantly above its annual target. Multiple brokerage firms anticipate the fund will gradually reduce its Korean equity holdings starting in July; under the most pessimistic scenario, sales could reach as high as 74.4 trillion won (approximately $48 billion). Following this news, the KOSPI opened 1.4% higher on Wednesday but quickly reversed course, plunging as much as 4% intraday before closing down over 2%. Subsequently, authorities urgently issued clarifications. On July 1, NPS Chairman Kim Sung-joo published an article titled 'The Truth Behind NPS Rebalancing and the So-Called 74-Trillion-Won Sell-Off Bomb,' stating that the widely circulated claim of a '74.4-trillion-won sell-off wave' was 'baseless.' As a public pension fund, the NPS will adopt a gradual rebalancing strategy—imposing limits on monthly and daily adjustment sizes—to minimize market impact. This 'viral rumor' was not the only one to trigger a selloff in Korean equities. As previously reported by Wall Street Insights, another recent online rumor claimed that Seoul had sent official letters to Samsung Electronics and SK Hynix requesting establishment of a government-led think tank on profit-sharing—a claim swiftly denied by official sources. Analysts note that NPS rebalancing is a routine asset-allocation activity. However, given that the NPS manages over $1.2 trillion in assets—making it the world's third-largest pension fund—any buying or selling activity attracts intense market scrutiny. Against the backdrop of already elevated Korean equity valuations and fragile market sentiment, shifts in liquidity have become a focal point for investors. Korean equities have risen too rapidly, pushing NPS domestic equity exposure beyond regulatory limits. Per the NPS's current asset-allocation guidelines, the target allocation to domestic Korean equities for 2026 is 20.8%, with an allowable deviation range of ±8 percentage points—i.e., an upper limit of 28.8%. However, the recent rapid rise in Korean equities has reportedly pushed the NPS's domestic equity allocation to approximately 30%, clearly exceeding the regulatory ceiling. The NPS employs a disciplined rebalancing mechanism: when the weight of any asset class deviates from its target range, the fund proactively sells the overweighted assets and purchases the underweighted ones to restore its intended allocation structure and control overall portfolio risk.

South Korea's National Pension Service reportedly sells U.S. dollars to support the won

South Korea's National Pension Service (NPS) reportedly sells U.S. dollars to support the won. According to a Caixin report dated December 9, the NPS has recently begun selling U.S. dollars, resuming its prior intervention to bolster the Korean won. Sources familiar with the matter stated that the NPS's dollar sales form part of its tactical hedging strategy. As of end-September, the NPS held approximately $542 billion in overseas assets. This move comes amid a nearly 8% depreciation of the won against the U.S. dollar in the second half of the year—the worst performance among Asian currencies—amid market concerns over capital outflows and trade uncertainty. The NPS previously implemented similar strategic hedging measures between January and May this year. Following the news, the won surged against the U.S. dollar, erasing an earlier decline of up to 0.2%. An NPS spokesperson declined to comment on the matter. Traders expect the NPS to activate its hedging strategy whenever the won-dollar exchange rate reaches extreme levels relative to its long-term average—estimated to be around 1,475–1,485.

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