Pension funds sell Samsung Electronics, buy SK hynix amid rebalancing

The National Pension Service has begun rebalancing its portfolio, but the "sell-off bomb" the market feared has not arrived. Pension funds have been cutting Samsung Electronics while adding SK hynix, focusing on adjusting individual stock weightings rather than broadly reducing market exposure.

Securities firms expect market disruption to remain limited even as the National Pension Service resumes rebalancing, according to the financial investment industry Sunday. Analysts say a sudden flood of sell orders is unlikely, as the fund can reduce its rebalancing ceiling and control the pace of execution.

"The annual, monthly and daily rebalancing caps have been lowered to minimize market impact, and both the actual scale and pace of rebalancing execution are kept confidential," said Cho Yong-gu, a researcher at Shinyoung Securities. "The stronger the upward trend in share prices, the more the pace of selling will slow — and further raising the domestic equity allocation target toward year-end is also being considered."

The government and the National Pension Service are also prioritizing minimizing market disruption. At the National Pension Fund Management Committee on Wednesday, Minister of Health and Welfare Jeong Eun-kyung said domestic share prices had risen sharply, pushing the fund's domestic equity weighting higher. "Even if rebalancing occurs, we will closely review the operational process to ensure market impact is minimized," she said.

Kim Sung-joo, chairman of the National Pension Service, called the 74 trillion won ($48.1 billion) figure "completely groundless," explaining that rebalancing decisions take into account not only share prices but also returns on bonds and alternative investments, as well as interest rates and exchange rates. "Even if the National Pension Service enters rebalancing, the probability of it becoming a sell-off bomb is zero," he said.

Actual pension fund trading also reflects a focus on stock-by-stock rebalancing rather than broad market reduction. Korea Exchange data show pension funds have been the heaviest net sellers of Samsung Electronics so far this month, offloading 201.6 billion won worth of shares. SK Square (196.7 billion won), Samsung Electro-Mechanics (124.5 billion won), Samsung C&T (65.2 billion won) and Samsung Electronics preferred shares (36.4 billion won) also ranked among the top net-sold stocks.

On the net purchase side, SK hynix led with 108.1 billion won, followed by Hanwha Aerospace (56.7 billion won), Shinhan Financial Group (52.4 billion won), Celltrion (38.4 billion won) and Amorepacific (38.3 billion won).

Samsung Electronics faces concerns about slowing profitability in its set business ahead of its preliminary second-quarter earnings release Tuesday, while SK hynix is drawing investor optimism ahead of its Nasdaq ADR listing Friday, with expectations of expanding HBM demand and a broader global investor base.

"Strong memory chip price increases should keep DS division earnings solid, but weakness in the set business divisions is expected due to rising component costs," said Seo Seung-yeon, a researcher at DB Securities. "Server demand is offsetting weakness in mobile and PC demand, but profitability in the smartphone (MX) and TV and home appliance (VD/DA) businesses will deteriorate due to rising key component prices and promotional cost burdens."

"SK hynix's earnings and share price uptrend is not over yet, alongside expanding AI investment," said Kim Dong-won, a researcher at KB Securities. "Memory chip supply growth will remain limited through 2028, while AI memory demand will expand rapidly." Park Sang-hyeon, a researcher at iM Securities, said the expanded dollar supply from SK hynix's ADR listing would have a considerable impact on the exchange rate and foreign investor flows.

Defense and financial blue chips also ranked among the top net purchases. The NATO summit, set for Monday and Tuesday, is expected to address defense spending increases and expanded defense industry cooperation as key agenda items. "Hanwha Aerospace is the company that best fits the trend of consolidated demand among NATO member states," said Choi Jeong-hwan, a researcher at Daishin Securities. Kim Dae-jun, a researcher at Korea Investment & Securities, said investors should consider increasing their weighting in defensive sectors given rising market volatility. "With market interest rates elevated, attention should be paid to financial stocks such as banks and insurers," he said.